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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 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMUDG
RNS Number : 8972F
UDG Healthcare Public Limited Co.
23 May 2017
UDG Healthcare plc
Interim Report 2017
23 May 2017: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its results for the six months to 31 March 2017, after a period of strong financial growth and continued progress on the Group's key strategic initiatives.
Financial Results - six months to 31 March 2017
Hot Features
Premium
Constant
currency
Increase/ Increase/
(decrease) (decrease)
IFRS Adjustments(1) Adjusted on 2016 on 2016
based
$'m $'m $'m % %
Continuing operations
Revenue 578.9 - 578.9 8 15
Operating profit 46.8 12.0 58.8 13 21
Profit before tax 40.9 12.0 52.9 19 29
Diluted earnings
per share (cent) 12.51 3.72 16.23 19 29
Discontinued operations(2)
Diluted earnings
per share (cent) - - - (100) (100)
Total diluted earnings
per share (cent) 12.51 3.72 16.23 (21) (15)
Dividend per share
(cent) (3) 3.58 - 3.58 5 5
---------------------------- -------- ----------------- ----------- ------------------ -------------
31
31 March 30 September March
2017 2016 2016
Net cash/(debt) ($'m) 91.1 143.2 (259.6)
Net cash/(debt)/annualised
EBITDA 0.61 1.03 (1.69)
---------------------------- --------- --------------- -------------------------
Non-IFRS 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-IFRS 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 and these adjusted measures are explained on pages 39-43.
(1) Adjusted operating profit, profit before tax and diluted EPS are stated before the amortisation of acquired intangible assets ($10.2m, pre-tax) and transaction costs ($1.8m, pre-tax).
(2) The Group has classified its joint venture arrangement with Magir Limited as a discontinued operation and an asset held for sale. The Group did not recognise an operating profit contribution from the asset in the period. The discontinued operations in the prior period also included United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. The Group's disposal of these operations was completed on 1 April 2016.
(3) The interim dividend in the prior period of 3.41 $ cent (3.05 EUR cent) has been translated at the dividend record date spot exchange rate of $0.8954 = EUR1.
Financial highlights (Continuing Group)
-- Diluted earnings per share(1) (EPS) from continuing operations increased by 19% (29% on a constant currency basis), aided by acquisitions and other timing benefits during the first half of the financial year.
-- Guidance for full year constant currency continuing Group diluted earnings per share(1) (EPS) increased from a range of 13% to 16% previously, to be between 15% and 18% ahead of last year (including the acquisitions below).
-- Revenue growth of 8% (15% on a constant currency basis) to $578.9 million. -- Operating profit(1) growth of 13% (21% on a constant currency basis) to $58.8 million.
-- Operating margin(1) increased from 9.7% to 10.2%. Net operating margin(3) increased from 11.4% to 12.0%.
-- Profit before tax(1) up 19% (29% on a constant currency basis).
-- Total Group EPS(1) down 21% (15% constant currency) due to the sale of the United Drug businesses in April 2016.
-- 5% increase in interim dividend to 3.58 cent per share. -- Net cash of $91 million at 31 March 2017. -- Return on capital employed (ROCE) at 31 March 2017 was 13.8%, up from 13.5% at 31 March 2016.
Strategic & operating highlights
-- Ashfield's operating profit(1) increased by 18% (underlying growth(2) of 8%), driven by a combination of organic and acquisition growth. STEM and Pegasus have performed well since acquisition.
-- Agreement to acquire Sellxpert, a German contract sales organisation reached in May 2017, for a total consideration of up to $14.4 million, subject to competition authority approval.
-- Sharp's operating profit(1) increased by 8% (underlying growth(2) of 8%), driven by continued growth in Sharp US and an improvement in Sharp Europe.
-- Two capacity expansion initiatives in Sharp announced in April 2017, across commercial and clinical packaging.
-- Aquilant's underlying operating profit(2) increased by 6% with reported performance negatively impacted by adverse currency translation movements.
Chief Executive's comment
Commenting on the performance, UDG Healthcare plc Chief Executive Officer, Brendan McAtamney said:
"The first half of 2017 has been another very progressive period for UDG Healthcare, with strong growth delivered and continued progress made in pursuit of the Group's strategic objectives. The continuing Group's earnings per share increased by 19% (29% on a constant currency basis), driven by continued momentum in underlying profit growth and a strong performance by our recent acquisition, STEM.
The Group is increasing its guidance for constant currency diluted earnings per share(1) (EPS) for the year to 30 September 2017 by 2% to a range of between 15% and 18% ahead of last year."
1 Before the amortisation of acquired intangible assets and transaction costs.
2 Underlying growth is reported growth adjusted for the impact of currency translation movements and any acquisition or disposal activity.
3 Operating margin as a percentage of net revenue. Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin.
Group development and outlook
Management and Board changes
In early May 2017, Jez Moulding was appointed Chief Operating Officer of the Group and Executive Vice President of Ashfield. Jez has over 20 years of senior international leadership and pharmaceutical experience focused on the Group's key global markets, predominantly gained in various roles for Sanofi. Jez's appointment will strengthen the Group's senior management team and support the continued international growth of the Group.
In April 2017, Myles Lee joined the Board as a Non-Executive Director. Mr Lee is a former Group Chief Executive of CRH plc, a FTSE100 and Fortune 500 company.
Corporate development activity
The Group continues to be active from a corporate development perspective. In October 2016, the Group completed the acquisition of STEM which has performed well during the period. It is worth noting that STEM's activity levels are weighted towards the first half of the Group's financial year, as fewer audits are carried out during the summer period.
In May 2017, the Group announced the acquisition of Sellxpert GmbH ("Sellxpert"), a German contract sales outsourcing business for a total potential consideration of up to $14.4 million, subject to competition authority approval. The acquisition of Sellxpert will strengthen Ashfield Commercial & Clinical's presence and capabilities in Germany.
As at 31 March 2017, the Group was in a net cash position and will continue to focus on delivering organic growth and executing strategic acquisition opportunities, complementary to the Group's existing high growth businesses.
Sharp and Ashfield expansion
In April 2017, Sharp announced two further capacity expansion initiatives. In the US, Sharp acquired a pharmaceutical grade packaging facility close to its existing sites for $14 million. This will provide additional capacity across both commercial and clinical trial packaging services.
In the UK, Sharp is investing $11 million in its clinical packaging business with the purchase of a new facility in South Wales, more than tripling the size of the current UK facility. The fit out of this facility is expected to be completed by late 2018.
These expansion initiatives follow on from the completion of the build and fit out of a new packaging facility in Pennsylvania in 2016, which increased Sharp's US business commercial packaging capacity by approximately 30%. These capacity expansions will enable Sharp to capitalise on the ongoing growth in demand for both commercial and clinical packaging services.
To facilitate the continued growth of the Ashfield business, Ashfield's US Commercial & Clinical operations completed the move to its new leased office facility in Pennsylvania in April 2017. This facility is 60% larger than the previous premises and will support the continued expansion of Ashfield in the strategically important US market.
These expansion initiatives are consistent with the Group's strategy of expanding capacity to support new and existing clients. This leaves the Group well positioned to benefit from the positive growth outlook in the outsourced healthcare services market and the market opportunities that this will present.
Future Fit
The Group remains focused on investing in scalable infrastructure across HR, Finance and IT to support the continued delivery of sustainable future growth. As part of this project, the Group launched its Human Resource Information System, Workday, in April 2017. In addition, the implementation of Ashfield's new finance system is being rolled-out on a phased basis over the next 18 months.
These investments will support the Group's future growth and ensure it is well placed to manage existing businesses and integrate future acquisitions.
Reporting currency
The Group announced in August 2016 that from the beginning of the new financial year on 1 October 2016, the Group would change its reporting currency to US Dollar. This 2017 Interim Report is the first set of results which the Group has presented in US Dollar. Please see note 19 for further details on the change in presentational currency.
Outlook
The Group is well positioned to deliver continued growth both organically and through strategic acquisitions, and remains focused on increasing its scale and building on its leading market positions.
Based on improved underlying trading performance and the benefit of the Sellxpert acquisition, the Group is increasing its guidance for continuing Group constant currency adjusted diluted earnings per share (EPS) for the year to 30 September 2017 from a range of 13% to 16% previously, to be between 15% and 18% ahead of last year.
While constant currency adjusted diluted EPS growth was 29% in H1 2017, the Group does not expect this growth rate to be representative of the full year outcome. Underlying operating profit growth of 8% during H1 2017, was supplemented by:
-- the acquisition of Pegasus in April 2016;
-- STEM's seasonally stronger first half of the financial year due to higher audit activity levels;
-- a decrease in net interest costs compared to the prior year period following the repayment of the RCF bank facility in April 2016; and
-- no Future Fit operating costs (commenced in April 2017).
The average 2016 financial year exchange rates were $1:EUR0.9002 and $1:GBP0.7045. The average exchange rates during H1 2017 were $1:EUR0.9330 and $1:GBP0.8066 (2016 H1 $1:EUR0.9102 and $1:GBP0.6787). Based on the current prevailing exchange rates, the Group is likely to face a foreign exchange headwind on the translation of non-US profits in FY17.
The Group expects to continue its 30+ year history of dividend growth in FY17. The Board has declared an interim dividend of 3.58c per share, a 5% increase on the 2016 interim dividend.
Preliminary Results
The Group will issue preliminary results for the year to 30 September 2017 on Tuesday, 28 November 2017.
Analyst presentation
A presentation for investors and analysts will be held at the London Stock Exchange at 8.30 GMT today, Tuesday, 23 May 2017. If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows:
Audio webcast
http://edge.media-server.com/m/p/ee9kdegt
Conference call
UK number: + 44 20-3427-1903
Ireland number: + 353-1-246-5603
US number: + 1-646-254-3388
Participant code: 1935522
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 2017
Ashfield
Six months to 31 March 2017 2016 Actual Underlying
$'m $'m Growth Growth(2)
---------------------------- ------ ------ ------- -----------
Gross revenue
Commercial & Clinical 285.9 260.9 10% 17%
Communications (including
Advisory) 94.0 78.0 21% (3%)
Total gross revenue 379.9 338.9 12% 13%
Net revenue(1)
Commercial & Clinical 208.1 193.5 8% 14%
Communications (including
Advisory) 80.9 65.7 23% (3%)
Total net revenue 289.0 259.2 12% 10%
Operating profit
Commercial & Clinical 17.3 16.6 4% 8%
Communications (including
Advisory) 19.1 14.2 35% 7%
Total operating profit 36.4 30.8 18% 8%
Operating margin
Operating margin (on gross
revenue) 9.6% 9.1%
Net operating margin (on
net revenue) 12.6% 11.9%
---------------------------- ------ ------ ------- -----------
(1) Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin. There are no pass-through costs in Sharp or Aquilant.
(2) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
Ashfield delivered a strong financial performance in H1 2017, benefiting from both good organic growth and acquisitions completed in 2016. Net revenue was up 12% to $289.0 million and operating profit up 18% to $36.4 million.
Adjusting for the negative impact of currency translation movements and the contribution of acquisitions, Ashfield generated 10% underlying net revenue growth and underlying operating profit growth of 8%. Operating margin increased to 9.6%, while net operating margin (allowing for pass-through costs) increased to 12.6%.
Ashfield Commercial & Clinical generated good growth during the period with underlying operating profit growth of 8%. This was principally due to a strong performance in North America, driven by increased activity levels with one client. Ashfield's North American Commercial & Clinical operations recently completed the move to new offices in Pennsylvania ensuring the business has capacity for future growth. The European business demonstrated good growth with particularly strong growth in Germany.
The acquisition of Sellxpert, which remains subject to competition authority approval, will strengthen Ashfield Commercial & Clinical's presence and capabilities in Germany and Ashfield's leading market position in Europe.
Ashfield Communications delivered strong growth during the period with net revenue up 23% and operating profit up 35% including the benefit of the acquisitions of STEM and Pegasus during 2016. STEM has performed particularly well during the seasonally stronger first half of the financial year. While underlying net revenue growth was 3% behind, underlying profit was 7% ahead of the prior period due to higher growth from higher margin services.
Sharp
2017 2016 Actual Underlying
$'m $'m Growth Growth(1)
------------------------- ------ ------ ------- -----------
Revenue
US 124.1 118.8 4% 4%
Europe 28.6 26.6 7% 17%
Total revenue 152.7 145.4 5% 7%
Operating profit/(loss)
US 19.0 18.1 5% 5%
Europe 0.2 (0.3) - -
Total operating profit 19.2 17.8 8% 8%
Operating margin % 12.6% 12.2%
------------------------- ------ ------ ------- -----------
(1) Underlying growth adjusts for the impact of currency translation movements. There was no acquisition or disposal activity in 2016 or H1 2017.
Sharp delivered a good performance in H1 2017, with revenues up 5% to $152.7m and operating profit up 8% to $19.2m. Adjusting for the negative impact of currency translation movements, the division generated underlying revenue growth of 7% and underlying operating profit growth of 8%. Operating margins increased to 12.6% during the period.
Sharp US delivered good growth during the period compared to a strong comparable prior period. Underlying trading performance across all packaging formats was good, with biotech being particularly strong.
Sharp's new commercial packaging facility in Pennsylvania opened in 2016 and is ramping up in line with expectations. In addition, a new US packaging site was acquired in April 2017 to expand the commercial and clinical offering to the Group's US clients, albeit this will have no material profit impact this year.
Sharp Europe generated underlying revenue growth of 17% and moved into profit during the period. The business development pipeline continues to improve and the Group remains increasingly optimistic about the prospects for the Sharp Europe business. However, given the longer lead times required in packaging services, the Group does not anticipate a significant improvement in performance until FY18 and FY19.
US and European legislation requires the mandatory serialisation of prescription medicines from late November 2017 in the US and February 2019 in Europe. The Group expects the benefit of serialisation to be weighted towards the second half of the calendar year.
Over the past 18 to 24 months, Sharp has significantly invested in its infrastructure, to ensure it is well positioned to meet the expected demand from both its existing and new clients for serialisation services. Additionally, Sharp continues to invest in high quality, FDA approved packaging facilities to expand capacity to meet increasing demand for its services. This leaves the business well positioned for continued growth from both new and existing clients.
Aquilant
2017 2016 Actual Underlying
$'m $'m Growth Growth(1)
-------------------- ----- ----- ------- -----------
Revenue 46.3 53.7 (14%) (2%)
Operating profit 3.2 3.6 (11%) 6%
Operating margin % 7.0% 6.8%
-------------------- ----- ----- ------- -----------
(1) Underlying growth adjusts for the impact of currency translation movements. There was no acquisition or disposal activity in 2016 or H1 2017
Revenue was 14% behind the prior period, however, adjusting for negative currency translation movements, underlying revenue was only marginally behind the prior period.
Reported operating profit was 11% behind the prior period, also primarily due to adverse currency translation movements. Underlying operating profit was 6% ahead of the prior period reflecting an improved sales mix, the benefit of new business which came on stream in 2016 and an improving capital sales profile.
For further information, please contact:
Investors and Analysts:
Alan Ralph Keith Byrne
CFO Head of IR, Strategy & Corporate
UDG Healthcare plc Communications
Tel: + 353-1-468-9000 UDG Healthcare plc
Tel: + 353-1-468-9000
Business / Financial media:
Lisa Kavanagh / Jack Hickey
Powerscourt
Tel: + 44-207-250-1446
About UDG Healthcare plc
UDG Healthcare plc (LON: UDG) is a leading international partner of choice delivering commercial, clinical, communications and packaging services to the healthcare industry, employing over 8,000 people with operations in 23 countries and delivering services in over 50 countries.
UDG Healthcare plc operates across three divisions: Ashfield, Sharp and Aquilant.
Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across two broad areas of activity: commercial & clinical services, and communications services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.
Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state of the art facilities 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.
Aquilant is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands.
The company is listed on the London Stock Exchange and is a constituent of the FTSE 250.
For more information, please go to: www.udghealthcare.com
Forward-looking information
Some statements in this announcement are or may be forward looking statements. They represent expectations for the Group's business, including statements that relate to the Group's future prospects, developments and strategies, and involve risks and uncertainties both general and specific. The Group has based these forward-looking statements on assumptions regarding present and future strategies of the Group and the environment in which it will operate in the future. However, because they involve known and unknown risks, uncertainties and other factors including but not limited to general economic, political, financial and business factors, which in some cases are beyond the Group's control, actual results, performance, operations or achievements expressed or implied by such forward looking statements may differ materially from those expressed or implied by such forward-looking statements and accordingly you should not rely on these forward looking statements in making investment decisions. Except as required by applicable law or regulation, neither the Group nor any other party intends to update or revise these forward looking statements after the date these statements are published, whether as a result of new information, future events or otherwise.
Finance Review
for the six months to 31 March 2017
Revenue
Revenue for the period of $578.9 million was 8% ahead of 2016. Ashfield reported revenue 12% ahead of the prior period (up 12% excluding pass through revenue) and Sharp reported revenue 5% ahead of the prior period. Aquilant revenue was 14% down on 2016, however, adjusting for negative currency translation movements, underlying revenue was only marginally behind the prior period.
Adjusted operating profit
Adjusted operating profit from continuing operations of $58.8 million is 13% ahead (21% on a constant currency basis) of H1 2016. Further details on the principal exchange rates used are provided in note 17.
Adjusted operating margin
The adjusted operating margin for the businesses for the period of 10.2% increased from 9.7% in H1 2016. 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 $5.9 million are 25% lower than H1 2016. This delivered a profit before tax of $52.9 million which is 19% ahead of 2016 (29% on a constant currency basis).
Taxation
The effective taxation rate has decreased from 24.0% in H1 2016 to 23.8% in H1 2017.
Adjusted diluted earnings per share
Continuing Group earnings per share is 19% ahead (29% on a constant currency basis) of H1 2016 at 16.23 cent.
Foreign exchange
The Group operates in 23 countries, delivering services in over 50 countries, with its primary foreign exchange exposure being the translation of local income statements and balance sheets into US Dollar for Group reporting purposes. The primary non-Dollar currencies are Sterling and Euro and their exchange rates for 2016 and 2017 are outlined in note 17. The Sterling exchange rate depreciated significantly in 2016. The retranslation of overseas profits to US Dollar has reduced constant currency EPS growth of 29% to a reported EPS growth rate of 19%.
Discontinued operations
The Group has classified its joint venture arrangement with Magir Limited as a discontinued operation and an asset held for sale. The Group did not recognise an operating profit contribution from the asset in the period. Discontinued operations in the prior period also included United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA, which were disposed of on 1 April 2016.
Cash flow
Net cash increased by $350.7 million to $91.1 million (31 March 2016: net debt $259.6 million). This was primarily as a result of the disposal of the United Drug Supply Chain businesses and MASTA in H2 2016. Net cash has decreased by $52.1 million since 30 September 2016 primarily due to the acquisition of STEM. The net cash inflow from operating activities was $59.1 million.
$27.5 million was invested in our 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 UK. $59.9 million was paid in consideration for the acquisition of STEM, while the Group also paid $0.2 million in deferred contingent consideration associated with prior year acquisitions. Dividend payments of $22.4 million relating to the final 2016 dividend were made during the period. Foreign exchange translation reduced cash balances by $15.4 million.
Balance sheet
Net cash at the end of the period was $91.1 million ($365.5 million cash and $274.4 million debt). The net cash/(debt) to annualised EBITDA ratio is 0.61 times cash (2016: 1.69 times debt) and net interest is covered 13.4 times (2016: 11.3 times) by annualised EBITDA. Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.
Return on capital employed
The ROCE for continuing operations was 13.8%, up from 13.5% at 31 March 2016.
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.
Dividends
The directors are proposing an interim dividend of 3.58 $ cent per share representing an increase of 5% on the 2016 interim dividend. The interim dividend is payable to shareholders on the Company's register at 5.00 pm on 2 June 2017 and will be paid on 27 June 2017. The Euro and Sterling exchange rates applied to the payment of the interim dividend will be set on 2 June 2017.
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:
Operational
----------------- ------------------------------- ----------------------------------
Risk Impact Mitigation
----------------- ------------------------------- ----------------------------------
Integration Acquisitive growth All potential acquisitions
remains a core element are assessed and evaluated
of the Group's strategy. to ensure the Group's
A failure to execute defined strategic and
and properly integrate financial criteria are
acquisitions, capitalise met. A discrete integration
on the synergies they process and post integration
bring and/or maintain review is developed
and develop their for each acquisition.
talent pool, may adversely This process is supported
affect the Group. by experienced management
with a view to achieving
identified benefits,
cultivating talent and
minimising general and
specific integration
risks.
----------------- ------------------------------- ----------------------------------
Client As the Group's activities In individual business
diversification consolidate and further units where there is
acquisitions are completed, a high dependence on
the Group's client a small number of key
base may become more clients the threats
concentrated making and opportunities leading
the Group more susceptible from that are reviewed
to competitive, client by divisional management
merger or procurement at each business review.
led threats. The impact that any
potential acquisition
may have on client concentration
is considered as part
of the acquisition assessment
process.
----------------- ------------------------------- ----------------------------------
Regulatory The Group has many Maintenance of legal,
legal and regulatory regulatory and quality
obligations, including standards is a core
in respect of:(a) value of the Group.
protection of patient We continue to build
information (such and review our quality
as HIPAA and GDPR);(b) and compliance management
patient and employee systems to ensure that
health and safety; they are fit for purpose
and(c) promotional in the context of the
spend. In addition, Group's strategy and
many of the Group's its legal and regulatory
activities are subject obligations. These reviews
to stringent licensing are supported by corporate
regulations. A failure audits on compliance,
to meet any of these quality and environment,
could result in products health and safety.
and services being
defective, harming
patients and/or giving
rise to very significant
liability.
----------------- ------------------------------- ----------------------------------
Patient Throughout the Group Packaging and supply
risk medicines and medical activity is carried
devices can be packaged, out under licence and
supplied or administered a contract with the
directly to patients. marketing authorisation
The risk of inappropriate holder (MAH). This requires
packaging, supply a regulated quality
or administration management system to
could lead to a negative ensure the integrity
patient experience. of the packaged product
and the supply chain.
Increasing levels of
automation are being
put in place to significantly
reduce the potential
for a mix-up. Administration
of medicines to patients
is covered by a detailed
client contract with
the MAH and a divisional
clinical governance
framework. All of these
processes are subject
to risk assessment,
training, management
review and internal
quality audits.
----------------- ------------------------------- ----------------------------------
Risk Impact Mitigation
----------------- ------------------------------- ----------------------------------
Talent The success of the The talent requirements
Group is built upon of the Group are monitored
effective management to ensure its management
teams that consistently teams meet prevailing
deliver superior performance. requirements in skills,
If the Group cannot competencies and performance.
attract, retain or Remuneration policies,
develop suitably qualified, management development,
experienced and motivated succession planning
employees, this could and the systems for
have an impact on developing talent inherited
business performance. from our acquisitions
have been reviewed and
the process of building
a One UDG management
development programme
has started with the
Inspire programme and
will be developed throughout
the coming years.
----------------- ------------------------------- ----------------------------------
Organisational The continued growth A significant organisational
design and evolution of the design review and subsequent
Group requires its structure changes has
organisational design taken place in UDG and
and infrastructure Ashfield during 2016
to be subject to review to better align structure
and successful ongoing with strategy. This
development. A failure will continue to be
to do so could adversely reviewed by the Board
affect the Group's and the Executive at
ability to meet its least once per year
objectives. as part of the annual
strategy review.
----------------- ------------------------------- ----------------------------------
IT systems The ability of the The Group's technology
Group to provide its and information systems
services effectively and infrastructure are
and competitively the subject of an ongoing
is dependent on technology programme to ensure
and information systems that they are capable
that are appropriately of meeting the Group's
integrated and that strategic intent and
meet current and anticipated future requirements,
future business, regulatory whilst further mitigating
and security requirements. against systems failures
and the increasing threat
of external interference.
----------------- ------------------------------- ----------------------------------
Business The Group is exposed The Group had developed
continuity to risks that, should a business continuity
they arise, may give template based on risk
rise to the interruption and is currently re-working
of critical business the operational business
processes that could continuity plans in
adversely impact the line with this. Mitigation
Group or its clients. strategies and continuity
plans are part of a
structured risk review
process.
----------------- ------------------------------- ----------------------------------
Contracts The underlying terms The Group has adopted
of the Group's commercial processes for identifying
relationships drive and mitigating against
the profitability undue risks in all prospective
of the Group. The commercial relationships,
nature of the Group's supported by personnel
business means that with expertise and/or
the Group could be experience in key commercial
exposed to undue cost risk areas.
or liability if it
agrees inappropriate
terms.
----------------- ------------------------------- ----------------------------------
Financial
----------------- ------------------------------- ----------------------------------
Controls The Group's resources The financial controls
and finances must of the Group, as well
be managed in accordance as their effectiveness,
with rigorous standards are monitored by the
and stringent controls. Board in the context
A failure to meet of the standards to
those standards or which the Group is subject
implement appropriate and the expectations
controls may result of its stakeholders.
in the Group's resources This monitoring is supported
being improperly utilised by a dedicated internal
or its financial statements audit function. The
being inaccurate or Group's financial function,
misleading. systems and controls
are also subject to
periodic review to ensure
that they remain robust
and fit for purpose.
----------------- ------------------------------- ----------------------------------
Financial The group is exposed The management of the
instruments to liquidity, interest financial risks facing
rate, currency and the Group is governed
credit risks. by policies reviewed
and approved by the
Board. These policies
primarily cover liquidity
risk, interest rate
risk, currency risk
and credit risk. The
primary objective of
the Group's policies
is to minimise financial
risk at a reasonable
cost. The Group does
not trade in financial
instruments. The Group
was in a net cash position
as of the 31st March
2017.
Risk Impact Mitigation
----------------- ------------------------------- ----------------------------------
Foreign UDG Healthcare plc's The majority of the
exchange reporting currency Group's activities are
is the US Dollar. conducted in the local
Given the nature of currency of the country
the Group's businesses, of operation. As a consequence,
exposure arises in the primary foreign
the normal course exchange risk arises
of business to other from the fluctuating
currencies, principally value of the Group's
Sterling and Euro. net investment in different
currencies. The 2016
UK vote to leave the
European Union has increased
the level of exchange
rate volatility. The
Group changed its reporting
currency to US Dollars
in FY17 as the US is
now the largest source
of profit for the Group.
Our strategic intent
is to proportionally
grow the US as a source
of earnings at a faster
rate than other markets
which will lower the
foreign exchange risk
for the Group.
----------------- ------------------------------- ----------------------------------
Brexit The trading uncertainty While there has been
associated with Brexit no indication that the
may result in some UK market for our services
UDG customers reducing is contracting as a
the size of their result of the Brexit
UK operations or have decision we will continue
a negative impact to monitor the Brexit
on our ability to negotiations to ensure
conduct business profitably that specific legislation
in the UK. does not have a negative
impact on our ability
to conduct business
profitably in the UK.
The overall Group exposure
to the UK as a proportion
of our total profitability
is expected to decline
as we acquire businesses
with greater exposure
to markets other than
the UK.
----------------- ------------------------------- ----------------------------------
Macroeconomic, The global macroeconomic The Group continues
geopolitical and geopolitical environment to review its portfolio
assumptions may have a detrimental of investments through
and global impact on our client the annual strategic
trends base and their propensity review process and through
to purchase services constant challenge at
from third party suppliers. a Senior Executive and
As a result we may Board level. Acquisitions
be overly exposed are sought which improve
to a weakening segment the balance of our investments
of the market. and give greater exposure
to innovative and growing
market segments.
----------------- ------------------------------- ----------------------------------
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
22 May 2017
(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 2017
As re-presented
and restated
(note 19,20)
Six months six months
ended ended
31 March 2017 31 March 2016
(Unaudited) (Unaudited)
Notes $'000 $'000
Continuing operations
Revenue 3 578,860 537,995
Cost of Sales (412,843) (385,170)
------------------------------------ ----------- ------------------------- ----------------------
Gross Profit 166,017 152,825
Selling and distribution
expenses (96,137) (90,363)
Administration expenses (10,245) (9,468)
Other operating expenses (11,543) (9,441)
Transaction costs (1,752) (916)
Share of joint ventures'
profit after tax 4 439 609
Operating profit 46,779 43,246
Finance income 5 11,916 6,035
Finance expense 5 (17,779) (13,846)
------------------------------------ ----------- ------------------------- ----------------------
Profit before tax from
continuing operations 40,916 35,435
Income tax expense (9,857) (9,600)
------------------------------------ ----------- ------------------------- ----------------------
Profit for the period from
continuing operations 31,059 25,835
Profit after tax for the
period from discontinued
operations 6 - 8,624
------------------------------------ ----------- ------------------------- ----------------------
Profit for the period attributable
to equity holders of the
parent 31,059 34,459
------------------------------------ ----------- ------------------------- ----------------------
Profit attributable to:
Continuing operations 31,059 25,835
Discontinued operations - 8,624
31,059 34,459
Earnings per ordinary
share:
Basic - continuing operations 7 12.54 10.50c
Basic - discontinued
operations 7 - 3.50c
------------------------------------ ----------- ------------------------- ----------------------
Basic 12.54 14.00c
------------------------------------ ----------- ------------------------- ----------------------
Diluted - continuing
operations 7 12.51 10.44c
Diluted - discontinued
operations 7 - 3.49c
------------------------------------ ----------- ------------------------- ----------------------
Diluted 12.51 13.93c
------------------------------------ ----------- ------------------------- ----------------------
Condensed consolidated statement of
comprehensive income
for the six months ended 31 March 2017
As re-presented
and restated
(note 19,20)
Notes six months
ended
31 March 2016
Six months (Unaudited)
ended
31 March 2017 $'000
(Unaudited)
$'000 34,459
Profit for the period 31,059
Other comprehensive income/(expense):
Items that will not be
reclassified to profit
or loss:
Remeasurement gain/(loss)
on Group defined benefit
schemes 14
* Continuing operations 9,774 (5,383)
* Discontinued operations - 515
Deferred tax on Group defined
benefit schemes
* Continuing operations (572) 579
* Discontinued operations - (103)
--------------------------------------- ------- ------------------- -------- ---------
9,202 (4,392)
--------------------------------------- ------- ------------------- -------- ---------
Items that may be reclassified
subsequently to profit
or loss:
Foreign currency translation
adjustment 10
* Continuing operations (15,192) (21,318)
* Discontinued operations - (531)
Group cash flow hedges:
- Effective portion of
cash flow hedges - movement
into reserve 9,539 (7,990)
- Effective portion of
cash flow hedges - movement
out of reserve (10,132) 3,762
------------------- --------
Effective portion of cash
flow hedges 10 (593) (4,228)
- Movement in deferred
tax - movement into reserve (1,192) (470)
- Movement in deferred
tax - movement out of reserve 1,266 998
------------------- --------
Net movement in deferred
tax 10 74 528
--------------------------------------- ------- ------------------- -------- ---------
(15,711) (25,549)
--------------------------------------- ------- ------------------- -------- ---------
Other comprehensive expense,
net of tax (6,509) (29,941)
--------------------------------------- ------- ------------------- -------- ---------
Total comprehensive income,
net of tax, attributable
to equity holders of the
parent 24,550 4,518
--------------------------------------- ------- ------------------- -------- ---------
Total comprehensive income/(expense)
attributable to:
Continuing operations 24,550 (3,987)
Discontinued operations - 8,505
--------------------------------------- ------- ------------------- -------- ---------
24,550 4,518
--------------------------------------- ------- ------------------- -------- ---------
Condensed consolidated statement of changes in
equity
for the six months ended 31 March 2017
Equity Other
share Share Retained reserves Total
capital premium earnings (note equity
10)
$'000 $'000 $'000 $'000 $'000
At 1 October 2016 14,535 187,355 784,432 (179,446) 806,876
Profit for the financial period - - 31,059 - 31,059
Other comprehensive income/(expense):
Effective portion of cash flow hedges - - - (593) (593)
Deferred tax on cash flow hedges - - - 74 74
Translation adjustment - - - (15,192) (15,192)
Remeasurement gain on defined benefit schemes - - 9,774 - 9,774
Deferred tax on defined benefit schemes - - (572) - (572)
Total comprehensive income/(expense) for the period - - 40,261 (15,711) 24,550
Transactions with shareholders:
New shares issued 41 2,739 - - 2,780
Issued in business combination 39 6,012 - - 6,051
Share-based payment expense - - - 1,699 1,699
Dividends paid to equity holders - - (22,388) - (22,388)
Release from share-based payment reserve - - 548 (548) -
At 31 March 2017 - unaudited 14,615 196,106 802,853 (194,006) 819,568
----------------------------------------------------- --------- -------- --------- ----------- ---------
for the six months ended 31 March 2016 (as re-presented and restated, note 6,19)
Equity Other
share Share Retained reserves Total
capital premium earnings (note equity
10)
$'000 $'000 $'000 $'000 $'000
At 1 October 2015 14,430 183,000 600,793 (116,219) 682,004
Profit for the financial period - - 34,459 - 34,459
Other comprehensive income/(expense):
Effective portion of cash flow hedges - - - (4,228) (4,228)
Deferred tax on cash flow hedges - - - 528 528
Translation adjustment
- Continuing operations - - - (21,318) (21,318)
- Discontinued operations - - - (531) (531)
Remeasurement (loss)/gain on defined benefit schemes
- Continuing operations - - (5,383) - (5,383)
- Discontinued operations - - 515 - 515
Deferred tax on defined benefit schemes - - - - -
- Continuing operations - - 579 - 579
- Discontinued operations - - (103) - (103)
------------------------------------------------------ --------- -------- --------- ---------- ---------
Total comprehensive income/(expense) for the period - - 30,067 (25,549) 4,518
Transactions with shareholders:
New shares issued 78 3,403 - - 3,481
Share-based payment expense - - - 906 906
Dividends paid to equity holders - - (21,659) - (21,659)
Release from share-based payment reserve - - 2,092 (2,092) -
At 31 March 2016 - unaudited 14,508 186,403 611,293 (142,954) 669,250
------------------------------------------------------ --------- -------- --------- ---------- ---------
Condensed consolidated balance sheet
as at 31 March 2017
As at 31
March As at 30
2016 as September
As at re-presented 2016 as
31 March and restated re-presented
2017 (note 6,19) (note 19)
(Unaudited) (Unaudited) (Audited)
Notes $'000 $'000 $'000
ASSETS
Non-current
Property, plant and equipment 8 141,142 138,558 136,877
Goodwill 9 428,855 393,878 384,520
Intangible assets 9 161,426 102,802 108,322
Investment in joint
ventures and associates 9 8,729 8,664 9,067
Derivative financial
instruments 11 19,602 15,240 13,185
Deferred income
tax assets 3,279 4,669 4,296
Employee benefits 14 13,613 14,185 13,939
Total non-current
assets 776,646 677,996 670,206
------------------------------- ------ ------------ -------------- --------------
Current
Inventories 53,188 63,734 54,941
Trade and other
receivables 252,121 225,249 233,791
Cash and cash equivalents 11 365,465 208,287 428,729
Current income tax
assets 1,658 133 4,532
Derivative financial
instruments 11 11,631 5,146 8,239
Assets held for
sale 6 - 558,763 -
Total current assets 684,063 1,061,312 730,232
------------------------------- ------ ------------ -------------- --------------
Total assets 1,460,709 1,739,308 1,400,438
------------------------------- ------ ------------ -------------- --------------
EQUITY
Equity share capital 14,615 14,508 14,535
Share premium 196,106 186,403 187,355
Other reserves 10 (194,006) (142,954) (179,446)
Retained earnings 802,853 611,293 784,432
Total equity 819,568 669,250 806,876
------------------------------- ------ ------------ -------------- --------------
LIABILITIES
Non-current
Interest-bearing
loans and borrowings 11 240,635 466,303 242,108
Provisions 12 37,111 8,160 6,084
Employee benefits 14 3,855 15,849 20,442
Deferred income
tax liabilities 39,751 31,087 31,008
Total non-current
liabilities 321,352 521,399 299,642
------------------------------- ------ ------------ -------------- --------------
Current
Interest-bearing
loans and borrowings 11 64,977 21,965 64,882
Trade and other
payables 222,809 209,136 204,468
Current income tax
liabilities 14,152 8,428 14,587
Provisions 12 17,851 12,986 9,983
Liabilities held
for sale 6 - 296,144 -
Total current liabilities 319,789 548,659 293,920
------------------------------- ------ ------------ -------------- --------------
Total liabilities 641,141 1,070,058 593,562
------------------------------- ------ ------------ -------------- --------------
Total equity and
liabilities 1,460,709 1,739,308 1,400,438
------------------------------- ------ ------------ -------------- --------------
Condensed consolidated cash flow statement
for the six months ended 31 March 2017
Six months
ended
31 March 2017 Six months ended
31 March 2016 as
(Unaudited) re-presented and
restated (note
19) (Unaudited)
------------------
Continuing Discontinued
Total operations operations Total
$'000 $'000 $'000 $'000
Cash flows from operating
activities
Profit before tax 40,916 35,435 10,359 45,794
Finance income (11,916) (6,035) (8) (6,043)
Finance expense 17,779 13,846 64 13,910
Operating profit 46,779 43,246 10,415 53,661
Share of joint ventures'
profit after tax (439) (609) (970) (1,579)
Depreciation charge 9,928 9,651 - 9,651
Loss/(profit) on disposal
of property, plant and equipment 35 2 (12) (10)
Impairment of intangible
assets - - 1,133 1,133
Amortisation of intangible
assets 11,543 9,441 - 9,441
Share-based payment expense 1,699 906 - 906
Decrease/(increase) in inventories 670 (3,118) 3,870 752
(Increase)/decrease in trade
and other receivables (8,578) 2,276 (10,074) (7,798)
Increase/(decrease) in trade
payables, provisions and
other payables 9,245 (9,821) (22,426) (32,247)
Exceptional items paid (156) (2,281) - (2,281)
(Decrease)/increase in transaction
costs accrued (1,139) 738 7,491 8,229
Interest paid (4,937) (6,558) - (6,558)
Income taxes paid (5,519) (3,624) (777) (4,401)
--------------------------------------- --- ----------------- ------------ ------------------ ---------
Net cash inflow/(outflow)
from operating activities 59,131 40,249 (11,350) 28,899
--------------------------------------- --- ----------------- ------------ ------------------ ---------
Cash flows from investing
activities
Interest received 331 242 8 250
Purchase of property, plant
and equipment (16,020) (18,706) (2,533) (21,239)
Proceeds from disposal of
property, plant and equipment 18 293 12 305
Investment in intangible
assets - computer software (11,522) (2,180) (6,648) (8,828)
Acquisition of subsidiaries
(net of cash and cash equivalents
acquired) (59,889) - - -
Deferred contingent acquisition
consideration paid (223) (5,802) - (5,802)
Net cash outflow from investing
activities (87,305) (26,153) (9,161) (35,314)
--------------------------------------- --- ----------------- ------------ ------------------ ---------
Cash flows from financing
activities
Proceeds from issue of shares
(including share premium
thereon) 2,780 3,481 - 3,481
Repayments of interest-bearing
loans and borrowings - (713) - (713)
Group transfers - 11,609 (11,609) -
Decrease in finance leases (57) (25) - (25)
Dividends paid to equity
holders of the Company (22,388) (21,659) - (21,659) --------------------------------------- --------------------- ------------ ------------------ --------- Net cash outflow from financing activities (19,665) (7,307) (11,609) (18,916) --------------------------------------- --------------------- ------------ ------------------ --------- Net (decrease)/increase in cash and cash equivalents (47,839) 6,789 (32,120) (25,331) Translation adjustment (15,425) - - (6,214) Cash and cash equivalents at beginning of period 428,729 - - 239,832 --------------------------------------- --------------------- ------------ ------------------ --------- Cash and cash equivalents at end of period 365,465 208,287 --------------------------------------- --------------------- ------------ ------------------ --------- Cash and cash equivalents is comprised of: Cash at bank and short term deposits 365,465 208,287 --------------------------------------- --------------------- ------------ ------------------ ---------
Notes to the condensed interim financial statements
for the six months ended 31 March 2017
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 2017, 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 2016 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 2017 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 2016 Annual Report except for the change in the Group's presentation currency from Euro to US Dollar.
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:
* Amendments to IAS 27: Equity Method in Separate
Financial Statements
* Amendment to IAS 1: Disclosure Initiative
* Amendments to IFRS 11: Accounting for acquisitions of
interests in Joint Operations
* Annual Improvements to IFRSs 2012-2014 Cycle
* Amendments to IAS 16 and IAS 38: Clarification of
acceptable methods of depreciation and amortisation
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 and the identification and valuation of intangible assets arising from acquisitions. 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 each of which operates in a distinct sector of the healthcare services market:
Ashfield - Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across two broad areas of activity: commercial & clinical services, and communications services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.
Sharp - Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state of the art facilities 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.
Aquilant - Aquilant is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands.
At 31 March 2017 the Group has classified the joint venture investment in Magir Limited as a discontinued operation and an asset held for sale. Details of the discontinued operations are included in note 6. 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:
Continuing operations
Six months Six months
ended ended
31 March 31 March 2016 as re- presented
2017
$'000 $'000
Revenue
Ashfield 379,933 338,901
Sharp 152,669 145,442
Aquilant 46,258 53,652
578,860 537,995
---------------------------------------------------------- ------------- ---------------------------------
Operating profit before acquired intangible amortisation,
transaction costs and exceptional
items
Ashfield 36,368 30,775
Sharp 19,184 17,783
Aquilant 3,222 3,634
58,774 52,192
Amortisation of acquired intangibles (10,243) (8,030)
Transaction costs (1,752) (916)
---------------------------------------------------------- ------------- ---------------------------------
Operating profit 46,779 43,246
Finance income 11,916 6,035
Finance expense (17,779) (13,846)
---------------------------------------------------------- ------------- ---------------------------------
Profit before tax 40,916 35,435
---------------------------------------------------------- ------------- ---------------------------------
Income tax expense (9,857) (9,600)
---------------------------------------------------------- ------------- ---------------------------------
Profit after tax for the period 31,059 25,835
---------------------------------------------------------- ------------- ---------------------------------
Geographical analysis of revenue
Six months Six months
ended ended
31 March 31 March 2016 as re- presented
2017
$'000 $'000
United Kingdom and Republic of Ireland 179,678 209,548
North America 294,378 239,499
Rest of the World 104,804 88,948
--------------------------------------------------------- ------------- ---------------------------------
578,860 537,995
--------------------------------------------------------- ------------- ---------------------------------
4. Share of joint ventures' profit after tax
Six months Six months
ended ended
31 March 31 March 2016 as re- presented
2017
$'000 $'000
Group share of revenue 15,482 15,764
Group share of expenses, inclusive of tax (15,043) (15,155)
---------------------------------------------- ------------- ---------------------------------
Group share of profit after tax - continuing 439 609
---------------------------------------------- ------------- ---------------------------------
5. Finance income and expense
Six months Six months
ended ended
31 March 31 March 2016 as re- presented
2017
$'000 $'000
Finance income
Income arising from cash deposits 487 290
Fair value of cash flow hedges transferred from equity 10,132 -
Fair value adjustments to fair value hedges 975 -
Fair value adjustment to guaranteed senior unsecured notes - 1,817
Foreign currency gain on retranslation of guaranteed senior
unsecured loan notes - 3,762
Ineffective portion of cash flow hedges 224 102
Net finance income on pension scheme obligations 98 64
-------------------------------------------------------------------- ------------- ---------------------------------
11,916 6,035
-------------------------------------------------------------------- ------------- ---------------------------------
Finance expense
Interest on bank loans and other loans
-wholly repayable within 5 years (3,745) (5,332)
-wholly repayable after 5 years (2,736) (2,515)
Interest on finance leases (1) (1)
Interest on overdrafts (12) (14)
Unwinding of discount on provisions (178) (405)
Fair value adjustments to fair value hedges - (1,817)
Fair value of cash flow hedges transferred from equity - (3,762)
Fair value adjustments to guaranteed senior unsecured loan notes (975) -
Foreign currency loss on retranslation of guaranteed senior
unsecured loan notes (10,132) -
(17,779) (13,846)
-------------------------------------------------------------------- ------------- ---------------------------------
Net finance expense relating to continuing operations (5,863) (7,811)
Net finance expense relating to discontinued operations - (56)
-------------------------------------------------------------------- ------------- ---------------------------------
Net finance expense (5,863) (7,867)
-------------------------------------------------------------------- ------------- ---------------------------------
6. Net result from discontinued operations and assets and liabilities classified as held for sale
On 1 April 2016 the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA for an aggregate cash consideration of $463.9 million before adjustments in respect of working capital, taxation and costs. At 31 March 2016, these operations were treated as discontinued operations and assets held for sale in accordance with IFRS 5.
The Group has treated the joint venture arrangement with Magir Limited as a discontinued operation and asset held for sale in accordance with IFRS 5 as the business is no longer a strategic asset following our exit from the Pharma Wholesaling segment of the market and given the decision by management to dispose of the shareholding as it is non-core. The comparative Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet and the Group Cash Flow Statement to 31 March 2016 have been restated to show the discontinued operation separately from continuing operations. The Group did not recognise an operating profit from the asset in the period.
The following table details the results of discontinued operations included in the Group Income Statement:
Six months Six months
ended ended
31 March 31 March
2017 2016 as
re-presented
$'000 $'000
Revenue - 750,206
Cost of sales - (695,371)
-------------------------------------- ------------ --------------
Gross profit - 54,835
Selling and distribution expenses - (37,266)
Administration expenses - (2,488)
Settlement gain on defined benefit
pension - 2,641
Transaction costs - (8,277)
Share of joint venture's profit after
tax(1) - 970
Operating profit - 10,415
Net finance expense - (56)
-------------------------------------- ------------ --------------
Profit from discontinued operations
before tax - 10,359
Income tax expense - (1,735)
-------------------------------------- ------------ --------------
Profit from discontinued operations
after tax - 8,624
-------------------------------------- ------------ --------------
(1) Restated to include Magir Limited.
In accordance with IFRS 5, depreciation of property, plant and equipment and amortisation of intangibles was not charged on the assets held for sale. If the assets had continued to be depreciated and amortised, the respective pre-tax charges for the prior period would have been $3,874,000 and $791,000.
The following table details the assets and liabilities classified as held for sale in the Group Balance Sheet:
Carrying
value
Carrying as re-
value presented
31 March 31 March
2017 2016
$'000 $'000
Assets
Property, plant and equipment - 96,799
Goodwill - 16,275
Intangible assets - 53,389
Deferred income tax assets - 488
Inventories - 127,941
Trade and other receivables - 245,515
Investment in joint venture(1) - 18,356
-------------------------------- ---------- ------------
Assets held for sale - 558,763
-------------------------------- ---------- ------------
Liabilities
Deferred income tax liabilities - (434)
Trade and other payables - (292,453)
Employee benefits - (2,877)
Current income tax liabilities - (380)
-------------------------------- ---------- ------------
Liabilities held for sale - (296,144)
-------------------------------- ---------- ------------
Net assets - 262,619
-------------------------------- ---------- ------------
(1) Restated to include Magir Limited.
7. Earnings per ordinary share
Continuing Discontinued Total
operations operations 2016
Total 2016 as 2016 as as re-
2017 re-presented re-presented presented
$'000 $'000 $'000 $'000
Profit attributable to
the owners of the parent 31,059 25,835 8,624 34,459
Adjustment for amortisation
of acquired intangible
assets (net of tax) 7,697 6,973 - 6,973
Adjustment for transaction
costs (net of tax) 1,563 916 8,277 9,193
Adjusted profit attributable
to owners of the parent 40,319 33,724 16,901 50,625
------------------------------------- ------- -------------- --------------------------- -----------
2017 2016
Number Number
of shares of shares
Weighted average number of shares 247,658,940 246,079,718
Number of dilutive shares under option 701,068 1,299,770
-------------------------------------------------------------- ------------------------------------------
Weighted average number of shares,
including share options 248,360,008 247,379,488
-------------------------------------------------------------- ------------------------------------------
7. Earnings per ordinary share (continued)
Continuing Discontinued
operations operations
2016 as 2016 as Total
Total re- re- 2016
2017 presented presented as re-presented
Basic earnings per
share - cent 12.54 10.50 3.50 14.00
Diluted earnings per
share - cent 12.51 10.44 3.49 13.93
Adjusted basic earnings
per share - cent 16.28(1) 13.70(1) 6.87(2) 20.57
Adjusted diluted earnings
per share - cent 16.23(1) 13.63(1) 6.83(2) 20.46
Non-IFRS 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-IFRS 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.
The Group has treated the joint venture arrangement with Magir Limited as a discontinued operation and asset held for sale in accordance with IFRS 5. The comparative Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet and Group Cash Flow to 31 March 2016 have been restated to reflect this change and as such the 2016 earnings per share calculations have been adjusted.
(1) Adjusted profit attributable to owners of the parent from continuing operations is stated before the amortisation of acquired intangible assets ($7.7m, net of tax) and transaction costs ($1.6m, net of tax).
(2) Adjusted profit attributable to owners of the parent from discontinued operations in 2016 is stated after adding back transaction costs ($8.3m, net of tax).
Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of earnings per share.
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 period.
8. Property, plant and equipment
Land Assets
and Plant Motor Computer under
buildings and equipment vehicles equipment construction Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 October
2016 89,779 113,720 968 20,407 - 224,874
Transfer from
intangible assets - - - 104 - 104
Additions in
period 799 11,421 34 1,246 2,520 16,020
Arising on acquisition - - - 122 - 122
Disposals in
period (1,208) (1,367) - (1,710) - (4,285)
Reclassifications (454) 454 - - - -
Translation
adjustment (1,304) (1,548) (35) (522) 20 (3,389)
------------------------ ----------- --------------- ---------- ----------- -------------- --------
At 31 March
2017 87,612 122,680 967 19,647 2,540 233,446
------------------------ ----------- --------------- ---------- ----------- -------------- --------
Depreciation
At 1 October
2016 27,280 50,947 677 9,093 - 87,997
Depreciation
charge for the
period 2,347 5,356 31 2,194 - 9,928
Eliminated on
disposal (1,208) (1,318) - (1,706) - (4,232)
Reclassifications (83) 83 - - - -
Translation
adjustment (367) (772) (27) (223) - (1,389)
------------------------ ----------- --------------- ---------- ----------- -------------- --------
At 31 March
2017 27,969 54,296 681 9,358 - 92,304
------------------------ ----------- --------------- ---------- ----------- -------------- --------
Carrying amount
------------------------ ----------- --------------- ---------- ----------- -------------- --------
At 31 March
2017 59,643 68,384 286 10,289 2,540 141,142
------------------------ ----------- --------------- ---------- ----------- -------------- --------
30 September
2016 62,499 62,773 291 11,314 - 136,877
------------------------ ----------- --------------- ---------- ----------- -------------- --------
9. Movement in goodwill, intangible assets and investment in joint ventures and associates
Investment
Intangible in joint
Goodwill assets ventures
and associates
$'000 $'000 $'000
Balance at 1 October 2016 384,520 108,322 9,067
Investment in computer software - 11,522 -
Amortisation of acquired intangible
assets - (10,243) -
Amortisation of computer software - (1,300) -
Transfer to property, plant
& equipment - (104) -
Arising on acquisition 51,326 55,332 -
Share of joint ventures' profit
after tax - - 439
Measurement period adjustment 1,844 (1,005) -
Translation adjustment (8,835) (1,098) (777)
Balance at 31 March 2017 428,855 161,426 8,729
------------------------------------- ----------- ------------------- ----------------
10. Other reserves
Cash Capital
flow Share-based Foreign Treasury redemption
hedge payment Exchange shares reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 October 2016 (12,499) 5,956 (165,574) (7,676) 347 (179,446)
Effective portion
of cash flow
hedges (593) - - - - (593)
Deferred tax
on cash flow
hedges 74 - - - - 74
Share-based
payment expense - 1,699 - - - 1,699
Release from
share-based
payment reserve - (548) - - - (548)
Translation
adjustment - - (15,192) - - (15,192)
Balance at
31 March 2017 (13,018) 7,107 (180,766) (7,676) 347 (194,006)
------------------- --------- ------------ ---------- --------- ------------ ----------
Cash Capital
flow Share-based Foreign Treasury redemption
hedge payment Exchange shares reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 October 2015 (6,918) 6,832 (108,781) (7,699) 347 (116,219)
Effective portion
of cash flow
hedges (4,228) - - - - (4,228)
Deferred tax
on cash flow
hedges 528 - - - - 528
Share-based
payment expense - 906 - - - 906
Release from
share-based
payment reserve - (2,092) - - - (2,092)
Translation
adjustment
- Continuing
operations - - (21,318) - - (21,318)
- Discontinued
operations - - (531) - - (531)
------------------- --------- ------------ ---------- --------- ------------ ----------
Balance at
31 March 2016 (10,618) 5,646 (130,630) (7,699) 347 (142,954)
------------------- --------- ------------ ---------- --------- ------------ ----------
11. Net cash/(debt)
As at As at
31 March 30 Sept
As at 2016 2016
31 March as re- as re-
2017 presented presented
$'000 $'000 $'000
Current assets
Cash at bank and short term deposits 365,465 208,287 428,729
Derivative financial instruments 11,631 5,146 8,239
Non-current assets
Derivative financial instruments 19,602 15,240 13,185
Current liabilities
Interest bearing loans (64,871) (21,752) (64,724)
Finance leases (106) (213) (158)
Non-current liabilities
Interest bearing loans (240,631) (466,290) (242,099)
Finance leases (4) (13) (9)
Net cash/(debt) 91,086 (259,595) 143,163
-------------------------------------- ----------- ----------- -----------
12. Provisions
Deferred Restructuring
contingent Onerous and other
consideration leases costs Total
$'000 $'000 $'000 $'000
Balance at 1 October
2016 15,419 359 289 16,067
Arising on acquisition 37,755 - - 37,755
Utilised during the
period (223) (25) (131) (379)
Unwinding of discount 178 - - 178
Measurement period
adjustment 999 - - 999
Translation adjustment 372 (15) (15) 342
------------------------- ---------------- ---------- -------------- --------
Balance at 31 March
2017 54,500 319 143 54,962
------------------------- ---------------- ---------- -------------- --------
Non-current 36,758 269 84 37,111
Current 17,742 50 59 17,851
Total 54,500 319 143 54,962
------------------------- ---------------- ---------- -------------- --------
13. Acquisition of subsidiary undertakings
During the six months ended 31 March 2017, the Group completed one acquisition:
- On 21 October 2016 the Group acquired STEM Marketing Limited ("STEM"), a leading global provider of commercial, marketing and medical audits to pharmaceutical companies.
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of STEM given the timing of completion of this transaction. Any amendments to these acquisition date fair values within the twelve-month timeframe from the date of acquisition will be disclosed in the relevant Annual Report as stipulated by IFRS 3 (Revised 2008), Business Combinations.
The Group has revised its estimate of the acquisition date fair value of intangibles, deferred contingent consideration and trade and other receivables in respect of the acquisition of Pegasus Public Relations Limited ("Pegasus"), which was acquired on 18 April, 2016. This has resulted in a corresponding increase in goodwill relative to the amount previously recorded. On the basis that this adjustment was not deemed to be material, it was accounted for in the current period.
The carrying amount of the assets and liabilities acquired are as follows:
Measurement
period 2017 2016
STEM adjustments Total Total
$'000 $'000 $'000 $'000
Assets
Non-current assets
Property, plant and
equipment 122 - 122 584
Intangible assets -
other intangible assets 55,332 (1,005) 54,327 10,482
--------------------------------------- -------- ------------- -------- --------
Total non-current assets 55,454 (1,005) 54,449 11,066
--------------------------------------- -------- ------------- -------- --------
Current assets
Trade and other receivables 9,459 (11) 9,448 6,215
--------------------------------------- -------- ------------- -------- --------
Total current assets 9,459 (11) 9,448 6,215
--------------------------------------- -------- ------------- -------- --------
Non-current liabilities
Deferred income tax
liabilities (9,406) 171 (9,235) (1,782)
--------------------------------------- -------- ------------- -------- --------
Total non-current liabilities (9,406) 171 (9,235) (1,782)
--------------------------------------- -------- ------------- -------- --------
Current liabilities
Trade and other payables (3,758) - (3,758) (3,542) Current income tax liabilities 620 - 620 (540) --------------------------------------- -------- ------------- -------- -------- Total current liabilities (3,138) - (3,138) (4,082) --------------------------------------- -------- ------------- -------- -------- Identifiable net assets acquired 52,369 (845) 51,524 11,417 Intangible assets - goodwill 51,326 1,844 53,170 11,610 --------------------------------------- -------- ------------- -------- -------- Total consideration (enterprise value) 103,695 999 104,694 23,027 --------------------------------------- -------- ------------- -------- -------- Satisfied by: Cash 63,247 - 63,247 16,843 Net cash acquired (3,358) - (3,358) (2,397) --------------------------------------- -------- ------------- -------- -------- Net cash outflow 59,889 - 59,889 14,446 Equity instruments (724,997 ordinary shares) 6,051 - 6,051 - Deferred contingent acquisition consideration 37,755 999 38,754 8,581 Total consideration 103,695 999 104,694 23,027 --------------------------------------- -------- ------------- -------- --------
Goodwill is attributable to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. The significant factors giving rise to the goodwill include the value of the workforce and management teams within the businesses acquired and the enhancement of the competitive position of the Group in the marketplace and the strategic premium paid by UDG Healthcare plc to create the combined Group.
The intangible assets arising on the acquisitions are related to the trade names, customer relationships and technology.
The contractual assets are not materially different from the disclosed trade and other receivables.
The total transaction related costs for completed and aborted acquisitions amounts to $1,752,000 (2016: $916,000). These are presented separately in the Group Income Statement.
The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payment to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit thresholds must be exceeded. On an undiscounted basis, the future payments for which the Group may be liable in respect of acquisitions in the current period ranges from $6,412,000 to $39,222,000 (2016: nil).
The Group's results for the period ended 31 March 2017 includes the following amounts in respect of the business acquired during the period:
2017
$'000
Revenue 19,415
Gross profit 14,445
Selling and distribution expenses (9,000)
Other operating expenses(1) (3,480)
------------------------------------- --------
Operating profit 1,965
Net interest expense (104)
------------------------------------- --------
Profit before tax 1,861
Income tax expense (441)
------------------------------------- --------
Profit after tax 1,420
------------------------------------- --------
(1) Other operating expenses consists of amortisation of intangible assets.
14. Employee benefits
Employee Employee Employee
benefit benefit benefit
asset liability total
$'000 $'000 $'000
Employee benefit asset/(liability)
at 1 October 2016 13,939 (20,442) (6,503)
Current service cost (1,194) - (1,194)
Curtailment gain - - -
Settlement gain - 2,666 2,666
Interest income/(costs) 199 (101) 98
Contributions paid - 4,096 4,096
Remeasurement gain 669 9,105 9,774
Translation adjustment - 821 821
------------------------------------ --------- -------------- ---------
Employee benefit asset/(liability)
at 31 March 2017 13,613 (3,855) 9,758
------------------------------------ --------- -------------- ---------
Employee Employee Employee
benefit benefit benefit
asset liability total
$'000 $'000 $'000
Employee benefit asset/(liability)
at 1 October 2015 14,639 (24,162) (9,523)
Current service cost (1,092) (256) (1,348)
Curtailment gain - 360 360
Settlement gain - 4,024 4,024
Interest income/(costs) 261 (261) -
Contributions paid - 6,797 6,797
Remeasurement gain/(loss) 377 (5,245) (4,868)
Translation adjustment - 17 17
------------------------------------ --------- -------------- ---------
Employee benefit asset/(liability)
at 31 March 2016 14,185 (18,726) (4,541)
------------------------------------ --------- -------------- ---------
Analysed as:
Assets and liabilities associated
with continuing operations 14,185 (15,849) (1,664)
Liabilities held for sale(2) - (2,877) (2,877)
------------------------------------ --------- -------------- ---------
14,185 (18,726) (4,541)
------------------------------------ --------- -------------- ---------
(2) This scheme related to United Drug Sangers ("NI Scheme") which was included in liabilities associated with assets classified as held for sale at 31 March 2016. On 1 April 2016 the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. Following completion of the disposal, the future funding obligations in respect of the NI scheme ceased to be the responsibility of the Group. Responsibility for the funding requirements in respect of the ROI schemes remain within the Group.
As set out in the consolidated financial statements for the year ended 30 September 2016, the Group operates a number of defined benefit pension schemes which are funded by the payments of contribution to separately administered trust funds. The employee benefit asset relates to the United States pension scheme and the employee benefit liability relates to the Republic of Ireland (ROI) pension scheme. The Republic of Ireland scheme has an actuarial gain in the current period which primarily relates to an increase in the discount rate. The change in the discount rate within the schemes is reflective of changes in bond yields during the period. The United States scheme has an actuarial gain in the current period arising from a higher than expected return on plan assets. In the Republic of Ireland scheme, there is no longer a salary increase assumption due to the accrual of pension benefits ceasing from 1 December 2015.
During the current and prior period, a general offer was made to the members of the ROI schemes to transfer their accrued benefits from the schemes in exchange for a fixed monetary amount. Acceptance of the offer was at the discretion of individual members and resulted in a settlement gain of $2,666,000 (2016: $4,024,000, $2,641,000 of which related to discontinued operations). Related professional fees amounts to $106,000 (2016: $261,000).
The principal assumptions and associated changes are as follows:
Republic of Ireland United States
Schemes Scheme
As at As at As at As at
31 March 30 Sept 31 March 30 Sept
2017 2016 2017 2016
Rate of increase
in salaries N/A N/A 2.75%-4.00% 2.75-4.00%
Rate of increase
in pensions 0-1.75% 0-1.75% 0.00% 0.00%
Inflation rate 1.75% 1.50% 2.75% 2.75%
Discount rate 2.00% 1.25% 3.80% 3.30%
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 2017, are as follows:
Carrying Fair
value value
$'000 $'000
Financial assets
Trade and other receivables 252,121 252,121
Derivative financial instruments 31,233 31,233
Cash and cash equivalents 365,465 365,465
------------------------------------ --------- --------
648,819 648,819
----------------------------------- --------- --------
Financial liabilities
Trade and other payables 222,809 222,809
Interest bearing loans and
borrowings 305,502 305,502
Finance lease liabilities 110 110
Deferred contingent consideration 54,500 54,500
------------------------------------ --------- --------
582,921 582,921
----------------------------------- --------- --------
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:
Total Level 1 Level 2 Level 3
$'000 $'000 $'000 $'000
Assets measured at fair
value
Designated as hedging
instruments
Cross currency interest
rate swaps 31,233 - 31,233 -
---------------------------------- ------ ------- ------- -------
31,233 - 31,233 -
---------------------------------- ------ ------- ------- -------
Liabilities measured
at fair value
At fair value through
profit or loss
Deferred contingent consideration 54,500 - - 54,500
---------------------------------- ------ ------- ------- -------
54,500 - - 54,500
---------------------------------- ------ ------- ------- -------
Summary of derivatives:
31 March 31 March
2017 2016
Amount
of financial Related
Amount assets/liabilities amounts
of financial Related as presented not offset
assets/liabilities amounts in the in the
as presented not offset balance balance
in the in the sheet sheet
balance balance (as- (as- Net (as-
sheet sheet Net represented) represented) represented)
$'000 $'000 $'000 $'000 $'000 $'000
Derivative
financial
assets 31,233 - 31,233 20,386 - 20,386
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 year are included in note 12. 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. The provision for deferred consideration is in respect of acquisitions completed during 2012, 2014, 2016 and 2017.
The significant unobservable inputs are as follows:
-- forecasted average annual net revenue growth rate 12%; -- forecasted average EBIT growth rate 17%; and -- risk adjusted discount rate 0.6% - 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 2017, holding the other inputs constant, would have the following effects:
Increase Decrease
$'000 $'000
------------------------------------------ --------- ---------
Effect of change in assumption on
income statements
Annual net revenue growth rate (1%
movement) - -
Annual EBIT growth rate (1% movement) - -
Risk-adjusted discount rate (1% movement) (171) 234
------------------------------------------ --------- ---------
16. Dividends
The Board has proposed an interim dividend of 3.58 $ cent per share. This dividend has not been provided for in the balance sheet at 31 March 2017 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 2016 (9.04 $ cent per share), was paid giving rise to a reduction in shareholders' funds of $22,388,000.
17. Foreign currency
The principal exchange rates used in translating Sterling and Euro balance sheets and income statements were as follows:
31 March 31 March
2017 2016
$1=StgGBP $1=StgGBP
Balance sheet (closing rate) 0.8002 0.6953
Income statement (average rate) 0.8066 0.6787
$1=EuroEUR $1=EuroEUR
Balance sheet (closing rate) 0.9354 0.8783
Income statement (average rate) 0.9330 0.9102
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.
At 31 March 2017, Magir Limited, the Group's joint venture investment, was classified as an asset held for sale. The Group has provided a guarantee to Magir's bankers for an amount of StgGBP10,750,000 and a loan, gross of interest, of StgGBP10,815,000. The comparative Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet and the Group Cash Flow Statement to 31 March 2016 have been restated to show the discontinued operation separately from continuing operations.
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 $5,282,000 for the six months ended 31 March 2017 (2016: $6,479,000).
19. Change in presentation currency
Following the disposal of the United Drug Supply Chain and MASTA businesses in April 2016, the geographic profile of the Group's businesses has changed considerably and the vast majority of the Group's profits are now generated in currencies other than Euro. Over half of the Group's profits are currently generated in US Dollars, the Group's US based businesses are demonstrating the greatest growth opportunities and future corporate development activity is likely to be US focused. Consequently, on 4 August 2016 the Group announced that from 1 October 2016, the financial results will be presented in US Dollars. The change in presentation currency has been applied retrospectively.
In re-presenting the Group Financial Statements for the year ended 30 September 2016 and the six-month period ended 31 March 2016, the reported information was converted to US Dollars from Euro using the following procedures:
-- Assets and liabilities were translated to US Dollars at the closing rates of exchange at each respective balance sheet date (30 September 2016: $1:EUR0.8960; six-month period ended 31 March 2016: $1:EUR0.8783; 30 September 2015: $1:EUR0.8926).
-- Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions.
-- Income and expenses were translated to US Dollars at an average rate at each of the respective reporting periods. This has been deemed to be a reasonable approximation (30 September 2016: $1:EUR0.9002; six-month period ended 31 March 2016: $1:EUR0.9102; 30 September 2015: $1:EUR0.8709).
-- Differences resulting from the retranslation were taken to reserves.
The impact on the prior period results, closing balance sheet and the numerator for earnings per share as originally reported is set out below:
Condensed consolidated income statement
for the six months ended 31 March 2016
As re-presented
Restated and restated
(note 6,20) (note 6,20)
six months six months
ended ended
31 March 31 March
2016 2016
(Unaudited) (Unaudited)
EUR'000 $'000
Continuing operations
Revenue 489,683 537,995
Cost of sales (350,574) (385,170)
------------------------------------- ------------- ----------------
Gross profit 139,109 152,825
Selling and distribution expenses (82,253) (90,363)
Administration expenses (8,618) (9,468)
Other operating expenses (8,594) (9,441)
Transaction costs (834) (916)
Share of joint ventures' profit
after tax 554 609
------------------------------------- ------------- ----------------
Operating profit 39,364 43,246
Finance income 5,493 6,035
Finance expense (12,603) (13,846)
------------------------------------- ------------- ----------------
Profit before tax from continuing
operations 32,254 35,435
Income tax expense (8,738) (9,600)
------------------------------------- ------------- ----------------
Profit for the period from
continuing operations 23,516 25,835
------------------------------------- ------------- ----------------
Profit after tax for the period
from discontinued operations 7,850 8,624
------------------------------------- ------------- ----------------
Profit for the period attributable
to equity holders of the parent 31,366 34,459
------------------------------------- ------------- ----------------
Profit attributable to:
Continuing operations 23,516 25,835
Discontinued operations 7,850 8,624
------------------------------------- ------------- ----------------
31,366 34,459
------------------------------------ ------------- ----------------
Earnings per ordinary share:
Basic - continuing operations 9.56c 10.50c
Basic - discontinued operations 3.19c 3.50c
------------------------------------- ------------- ----------------
Basic 12.75c 14.00c
------------------------------------- ------------- ----------------
Diluted - continuing operations 9.51c 10.44c
Diluted - discontinued operations 3.17c 3.49c
------------------------------------- ------------- ----------------
Diluted 12.68c 13.93c
------------------------------------- ------------- ----------------
Condensed consolidated statement of comprehensive income
for the six months ended 31 March 2016
As re-presented
Restated (note and
6) restated (note
six months 6,20)
ended six months ended
31 March 2016 31 March 2016
(Unaudited) (Unaudited)
EUR'000 $'000
Profit for the period 31,366 34,459
Other comprehensive income/(expense):
Items that will not be
reclassified to profit
or loss:
Remeasurement (loss)/gain
on Group defined benefit
schemes
* Continuing operations (4,900) (5,383)
* Discontinued operations 469 515
Deferred tax on Group
defined benefit schemes
* Continuing operations 527 579
* Discontinued operations (94) (103)
--------------------------------------- -------- --------- --------- ---------
(3,998) (4,392)
--------------------------------------- -------- --------- --------- ---------
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation
adjustment
* Continuing operations (26,663) (21,318)
* Discontinued operations (4,640) (531)
Gain on hedge of net
investment in foreign
operations 2,262 -
Group cash flow hedges:
- Effective portion of
cash flow hedges - movement
into reserve (7,273) (7,990)
- Effective portion of
cash flow hedges - movement
out of reserve 3,424 3,762
-------- ---------
Effective portion of
cash flow hedges (3,849) (4,228)
- Movement in deferred
tax - movement into reserve (428) (470)
- Movement in deferred
tax - movement out of
reserve 909 998
-------- ---------
Net movement in deferred
tax 481 528
--------------------------------------- -------- --------- --------- ---------
(32,409) (25,549)
--------------------------------------- -------- --------- --------- ---------
Other comprehensive expense,
net of tax (36,407) (29,941)
--------------------------------------- -------- --------- --------- ---------
Total comprehensive (expense)/income,
net of tax, attributable
to equity holders of
the parent (5,041) 4,518
--------------------------------------- -------- --------- --------- ---------
Total comprehensive (expense)/income
attributable to:
Continuing operations (7,743) (3,987)
Discontinued operations 2,702 8,505
--------------------------------------- -------- --------- --------- ---------
(5,041) 4,518
--------------------------------------- -------- --------- --------- ---------
Condensed consolidated balance sheet
As at 31 March As at 30 September As at 30 September
2016 2016 2015
(unaudited) (unaudited) (audited) (unaudited) (audited) (unaudited)
As restated
(note As re- As originally As re- As originally As re-
6) presented reported presented reported presented
EUR'000 $'000 EUR'000 $'000 EUR'000 $'000
ASSETS
Non-current
Property,
plant and
equipment 121,702 138,558 122,638 136,877 117,903 132,087
Goodwill 345,962 393,878 344,521 384,520 358,213 401,306
Intangible
assets 90,296 102,802 97,054 108,322 101,693 113,927
Investment
in joint ventures
and associates 7,610 8,664 8,124 9,067 23,079 25,855
Derivative
financial
instruments 13,386 15,240 11,814 13,185 22,048 24,700
Deferred income
tax assets 4,101 4,669 3,849 4,296 3,984 4,463
Employee benefits 12,459 14,185 12,489 13,939 13,067 14,639
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total non-current
assets 595,516 677,996 600,489 670,206 639,987 716,977
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Current
Inventories 55,981 63,734 49,226 54,941 55,017 61,636
Trade and
other receivables 197,845 225,249 209,472 233,791 205,248 229,939
Cash and cash
equivalents 182,949 208,287 384,131 428,729 214,078 239,832
Current income
tax assets 117 133 4,061 4,532 1,612 1,806
Derivative
financial
instruments 4,520 5,146 7,382 8,239 4,750 5,321
Assets held
for sale 490,808 558,763 - - 473,820 530,821
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total current
assets 932,220 1,061,312 654,272 730,232 954,525 1,069,355
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total assets 1,527,736 1,739,308 1,254,761 1,400,438 1,594,512 1,786,332
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
EQUITY
Equity share
capital 12,692 14,508 12,715 14,535 12,621 14,430
Share premium 155,262 186,403 156,084 187,355 152,164 183,000
Other reserves (23,412) (142,954) (41,295) (179,446) 10,077 (116,219)
Retained earnings 443,317 611,293 595,449 784,432 433,912 600,793
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total equity 587,859 669,250 722,953 806,876 608,774 682,004
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
LIABILITIES
Non-current
Interest-bearing
loans and
borrowings 409,577 466,303 216,923 242,108 415,840 465,866
Provisions 7,167 8,160 5,451 6,084 7,508 8,411
Employee benefits 13,921 15,849 18,315 20,442 18,303 20,505
Deferred income
tax liabilities 27,305 31,087 27,782 31,008 28,050 31,424
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total non-current
liabilities 457,970 521,399 268,471 299,642 469,701 526,206
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Current
Interest-bearing
loans and
borrowings 19,293 21,965 58,133 64,882 20,811 23,315
Trade and
other payables 183,694 209,136 183,190 204,468 191,758 214,831
Current income
tax liabilities 7,403 8,428 13,070 14,587 4,452 4,988
Provisions 11,406 12,986 8,944 9,983 18,683 20,931
Liabilities
held for sale 260,111 296,144 - - 280,333 314,057
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total current
liabilities 481,907 548,659 263,337 293,920 516,037 578,122
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total liabilities 939,877 1,070,058 531,808 593,562 985,738 1,104,328
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Total equity
and liabilities 1,527,736 1,739,308 1,254,761 1,400,438 1,594,512 1,786,332
-------------------- ------------ ------------ -------------- ------------ -------------- ------------
Numerator for adjusted earnings per share calculation
Continuing Discontinued As at 31 March
operations operations 2016 (unaudited)
As re- As re- As re-
As restated presented As restated presented As restated presented
EUR'000 $'000 EUR'000 $'000 EUR'000 $'000
Profit attributable
to equity
holders of
the Group(1) 23,516 25,835 7,850 8,624 31,366 34,459
Adjustment
for amortisation
of intangible
assets (net
of tax) 6,347 6,973 - - 6,347 6,973
Adjustment
for acquisition
costs (net
of tax) 834 916 7,534 8,277 8,368 9,193
Adjusted profit
attributable
to owners
of the parent 30,697 33,724 15,384 16,901 46,081 50,625
--------------------- ------------ ----------- ------------ ----------- ------------ -----------
(1) At 31 March 2016 the Group classified the joint venture investment in Magir Limited as a discontinued operation and an asset held for sale. Details of the discontinued operations are included in note 6.
20. Prior period reclassifications and restatements
Reclassification of wages and salary expenses
The Ashfield Division contracts out employees to its customers to work on sales and marketing of their products in the marketplace. These expenses were classified as selling and distribution expenses in the interim results for 2016 and prior years. The Group considers the classification of this expense as a cost of sale to be a more appropriate classification given that Group revenue includes the amounts charged to customers for their services. In addition, there has been a reclassification of pass-through revenue from cost of sales to revenue. Pass-through revenues relate to the recharging of travel and other costs to customers at zero margin. As a result, $32,391,000 (EUR29,484,000) of wages and salaries has been reclassified from selling and distribution expenses to cost of sales and $19,001,000 (EUR17,269,000) has been reclassified from cost of sales to revenue in H1 2016 so that the results are presented on a consistent basis in both 2017 and 2016. There is no impact on operating profit.
A summary of the impact on the previously reported figures in the condensed consolidated income statement for the period ended 31 March 2016 is set out below:
As previously As re-
stated Reclassification As restated presented
EUR'000 EUR'000 EUR'000 $'000
-------------------------- -------------- ----------------- ------------ -----------
Revenue 472,414 17,269 489,683 537,995
Cost of sales (303,821) (46,753) (350,574) (385,170)
Gross profit 168,593 (29,484) 139,109 152,825
Selling and distribution
expenses (111,737) 29,484 (82,253) (90,363)
Operating profit(1) 39,364 - 39,364 43,246
-------------------------- -------------- ----------------- ------------ -----------
(1) Adjusted for Magir Limited which has been classified as a discontinued operation.
21. Events after the balance sheet date
On 3 April 2017 the Group purchased Steel Eagle LLC, a pharmaceutical packaging facility in Pennsylvania, USA. The total consideration of $14.2 million was paid upfront. Based on initial assessment, the fair value of the net assets and liabilities acquired are estimated to be $14.2 million and consist primarily of property, plant and equipment and deferred revenue. On 22 May 2017 the Group agreed the acquisition of Sellxpert GmbH, a German contract sales organisation, for a total consideration of up to EUR13.1 million, subject to competition authority approval. Based on initial assessment, the fair value of the net assets and liabilities acquired (excluding intangible assets) are estimated to be EUR2.2 million and consist primarily of trade & other receivables, cash and trade & other payables. The initial accounting is incomplete at the date of approval of the interim report and, therefore, the Group is unable to disclose goodwill and information regarding revenue and profit and loss arising on these transactions.
22. Board Approval
This interim report was approved by the Board of Directors of UDG Healthcare plc on 22 May 2017.
Additional Information
Key performance indicators and non-IFRS performance measures
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-IFRS measures provides useful supplemental information which, when viewed in conjunction with 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.
None of the non-IFRS measures should be considered as an alternative to financial measures derived in accordance with IFRS. The non-IFRS measures can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS.
The principal non-IFRS measures used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the financial statements, are as follows:
Net revenue (continuing)
Definition
This comprises of gross revenue as reported in the Group Income Statement, adjusted for revenue associated with pass-through costs for which the Group does not earn a margin.
Six months Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
------------------------- ----------------- ---------- ----------
Revenue (continuing) Income Statement 578,860 537,995
Pass through revenue (90,899) (79,743)
-------------------------------------------- ---------- ----------
Net revenue (continuing) 487,961 458,252
-------------------------------------------- ---------- ----------
Adjusted operating profit (continuing)
Definition
This comprises of operating profit as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
------------------------------------------- ----------------- ---------- ----------
Operating profit (continuing) Income Statement 46,779 43,246
Transaction costs (continuing) Income Statement 1,752 916
Amortisation of acquired intangible assets
(continuing) Note 3 10,243 8,030
------------------------------------------- ----------------- ---------- ----------
Adjusted operating profit (continuing) 58,774 52,192
-------------------------------------------------------------- ---------- ----------
Adjusted operating profit (discontinued)
Definition
This comprises of operating profit as reported in results from discontinued operations before amortisation of acquired intangible assets, transaction costs and exceptional items.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
----------------------------------------- ------- ---------- ----------
Operating profit (discontinued) Note 6 - 10,415
Transaction costs (discontinued) Note 6 - 8,277
----------------------------------------- ------- ---------- ----------
Adjusted operating profit (discontinued) - 18,692
-------------------------------------------------- ---------- ----------
Adjusted profit before tax (continuing)
Definition
This comprises profit before tax as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
------------------------------------------- ----------------- ---------- ----------
Profit before tax (continuing) Income Statement 40,916 35,435
Transaction costs (continuing) Income Statement 1,752 916
Amortisation of acquired intangible assets
(continuing) Note 3 10,243 8,030
------------------------------------------- ----------------- ---------- ----------
Adjusted profit before tax (continuing) 52,911 44,381
-------------------------------------------------------------- ---------- ----------
Adjusted operating margin (continuing)
Definition
Measures the adjusted operating profit as a percentage of revenue.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
--------------------------------------- ------------------ ---------- ----------
Adjusted operating profit (continuing) Per above 58,774 52,192
Revenue (continuing) Income Statement 578,860 537,995
---------------------------------------- ----------------- ---------- ----------
Adjusted operating margin
(continuing) 10.2% 9.7%
----------------------------------------------------------- ---------- ----------
Net operating margin (continuing)
Definition
Measures the adjusted operating profit as a percentage of net revenue.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
--------------------------------------- ---------- ---------- ----------
Adjusted operating profit (continuing) Per above 58,774 52,192
Net revenue (continuing) Per above 487,961 458,252
--------------------------------------- ---------- ---------- ----------
Net operating margin (continuing) 12.0% 11.4%
--------------------------------------------------- ---------- ----------
Adjusted earnings per share
Definition
The Group defines adjusted earnings per share as basic earnings per share adjusted for the impact of amortisation of acquired intangible assets, transaction costs and exceptional items.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
---------------------------- --------- ---------- ----------
Adjusted earnings per share
(continuing) Note 7 16.23 13.63
Adjusted earnings per share
(discontinued) Note 7 - 6.83
---------------------------- --------- ---------- ----------
Adjusted earnings per share 16.23 20.46
--------------------------------------- ---------- ----------
Net Interest
Definition
The Group defines net interest as the net total of finance costs and finance income as presented in the Group Income Statement.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
---------------------------- ------------------- ---------- ----------
Finance costs Income Statement (17,779) (13,846)
Finance income Income Statement 11,916 6,035
---------------------------- ------------------- ---------- ----------
Net interest (continuing) (5,863) (7,811)
Net interest (discontinued) Note 6 - (56)
---------------------------- ------------------- ---------- ----------
Net interest (5,863) (7,867)
------------------------------------------------- ---------- ----------
Adjusted Net Interest
Definition
The Group defines adjusted net interest as net interest adjusted for the impact of the unwind of discount on provisions and the net finance cost on pension scheme obligations.
Six months
Six months
ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
------------------------------------------------- ---------- ---------- ----------
Net interest Per above 5,863 7,867
Unwind of discount on provisions Note 5 (178) (405)
Net finance income on pension scheme obligations
(continuing) Note 5 98 64
Net finance cost on pension scheme obligations
(discontinued) Note 5 - (56)
------------------------------------------------- ---------- ----------
Adjusted net interest 5,783 7,470
----------
EBITDA (continuing)
Definition
EBITDA represents the continuing earnings before net interest, tax, depreciation, amortisation of intangible assets, exceptional items and transaction costs.
Six months
Six months ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
Adjusted operating profit Per above 58,774 52,192
Depreciation Cash Flow Statement 9,928 9,651
Amortisation of computer software Note 9 1,300 1,411
EBITDA (continuing) 70,002 63,254
Annualised EBITDA
Definition
Annualised EBITDA is continuing and discontinued EBITDA for the previous 12 months adjusted for the share of joint venture profits, dividends received from joint ventures, transaction costs, profit/(loss) on disposal of fixed assets, impairment of intangible assets, the annualisation of the EBITDA of companies acquired during the period and the EBITDA of completed disposals.
12 months
12 months ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
EBITDA (continuing) 144,878 134,331
EBITDA (discontinued) 685 37,240
Transaction costs (continuing) (3,053) (1,994)
Transaction costs (discontinued) Note 6 - (12,660)
JV profit share (continuing) (623) (119)
JV profit share (discontinued) (685) (3,485)
Impairment of intangible assets 806 1,133
Loss on disposal of fixed assets 105 73
EBITDA of completed disposals - (454)
Adjusted to include annualised EBITDA of acquisitions 7,493 -
Annualised EBITDA 149,606 154,065
Interest cover
Definition
The interest cover ratio measures the Group's ability to pay interest charges on debt from cash flow.
12 months
12 months ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
Annualised EBITDA Per above 149,606 154,065
Adjusted annualised net interest 11,147 13,685
EBITDA interest cover (times) 13.4 11.3
Net cash/(debt) to EBITDA
Definition
Net debt to EBITDA ratio measures the Group's ability to pay its debt.
As at 31 March 2017 As at 31 March 2016
Calculation $'000 $'000
Annualised EBITDA Per above 149,606 154,065
Net cash/(debt) Note 11 91,086 (259,595)
Net cash/(debt) to EBITDA (times) 0.61 (1.69)
Return on capital employed (ROCE)
Definition
ROCE is the continuing adjusted operating profit expressed as a percentage of the Group's net assets employed. Net assets employed is the average of the opening and closing net assets in the period excluding net cash/(debt) adjusted for the cumulative historical amortisation of acquired intangible assets and restructuring charges on these net assets.
As at 31 March 2017 As at 31 March 2016
Calculation $'000 $'000
Net assets Balance Sheet 819,568 669,250
Less discontinued net assets Note 6 - (262,619)
Net (cash)/debt Note 11 (91,086) 259,595
Assets before net (cash)/debt 728,482 666,226
Historical intangible amortisation 150,542 141,061 Historical restructuring costs 43,399 47,023 Total capital employed 922,423 859,085 Average total capital employed 888,366 854,310 Rolling 12 month adjusted operating profit (continuing) 122,352 113,850 Return on capital employed 13.8% 13.5% Effective tax rate (continuing)
Definition
The Group continuing effective tax rate expresses the income tax expense adjusted for the tax impact of exceptional items, transaction costs and the amortisation of acquired intangible assets as a percentage of adjusted profit before tax for continuing operations.
Six months
Six months ended ended
31 March 31 March
2017 2016
Calculation $'000 $'000
Adjusted profit before tax (continuing) Per above 52,911 44,381
Tax charge (continuing) Income Statement 9,857 9,600
Tax relief with respect to transaction costs (continuing) 189 -
Deferred tax credit with respect to acquired intangible amortisation (continuing) 2,546 1,057
Income tax expense before exceptional, transaction costs and deferred tax attaching to
amortisation
of acquired intangible assets 12,592 10,657
Effective tax rate 23.8% 24.0%
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFVDEIIFFID
(END) Dow Jones Newswires
May 23, 2017 02:00 ET (06:00 GMT)
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