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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 |
TIDMUDG
RNS Number : 6507X
UDG Healthcare Public Limited Co.
28 November 2017
UDG Healthcare plc
Preliminary Announcement of Results
Year ended 30 September 2017
Strong full year performance, driven by organic growth and further acquisitions
28 November 2017: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its preliminary results for the year ended 30 September 2017, which reflects another year of strong growth and strategic progress for the Group.
Financial Results
Constant currency Increase/ increase/ (decrease) (decrease) IFRS Adjustments(1) Adjusted on 2016 on 2016 based $'m $'m $'m % % Continuing operations Revenue 1,219.8 - 1,219.8 13 17 Net revenue(2) 1,028.5 - 1,028.5 12 16 Operating profit 103.2 26.1 129.3 12 17 Profit before tax 92.8 26.1 118.9 17 23 Diluted earnings per share (EPS) (cent) 28.83 8.29 37.12 17 23 Discontinued operations(3) Diluted earnings per share (cent) - - - (100) (100) Total diluted earnings per share (cent) 28.83 8.29 37.12 (5) (1) Dividend per share (cent) 13.30 - 13.30 7 7 ------------------------------ -------- ----------------- ----------- ------------- ------------- 2017 2016 Net (debt)/cash ($'m) (53.3) 143.2 Net (debt)/cash/annualised EBITDA (times) (0.32) 1.05 ------------------------------ -------- ----------------- ----------- ------------- ---------------
Non-IFRS information
The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration. Reference to these performance measurements throughout this report are to the adjusted measurements unless otherwise stated and these adjusted measurements are explained on pages 34-37.
(1) Adjusted operating profit, profit before tax and diluted EPS are stated before the amortisation of acquired intangible assets ($22.1m, pre-tax) and transaction costs ($4.0m, pre-tax).
(2) Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin.
(3) The Group has classified its joint venture arrangement with Magir Limited as a discontinued operation and an asset held for sale. The discontinued operations in 2016 also included United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. The Group's disposal of these operations was completed on 1 April 2016.
Financial highlights (Continuing Group)
-- Adjusted diluted earnings per share(1) (EPS) from continuing operations increased by 17% (23% on a constant currency basis).
-- Net revenue growth of 12% (16% on a constant currency basis) to $1,028.5 million.
-- Adjusted operating profit(1) growth of 12% (17% on a constant currency basis) to $129.3 million. Adjusted net operating margin(3) stable at 12.6%.
-- Adjusted profit before tax(1) up 17% (23% on a constant currency basis) driven by:
o Underlying growth of 13% including the benefit of lower interest charges
o Acquisition growth of 10%
o Offset by adverse foreign exchange movements of 6%.
-- Proposed 7.5% increase in final dividend to $9.72c per share, yielding a full year dividend increase of 7% to $13.3c per share.
-- Net debt of $53.3 million at 30 September 2017 (0.32x net debt to EBITDA).
Strategic & operating highlights
-- Completed six acquisitions with a total capital commitment in excess of $270m, developing the Group's market leading positions and expanding its service offering.
-- Ashfield's operating profit(1) increased by 16% driven by a combination of underlying and acquisition growth (underlying growth(2) of
5% after a 3% additional Future Fit operating cost impact). Good performance by all acquired businesses since acquisition, with particularly strong growth from STEM Healthcare.
-- Significant progress enhancing the Ashfield service offering across advisory, communications, commercial and clinical services.
-- Sharp's operating profit(1) increased by 8% (underlying growth(2) of 11%), driven by Sharp Europe moving into profit and continued growth in Sharp US.
-- Continued development of the Sharp offering through investments in new facilities, across both the commercial and clinical packaging businesses in both the US and Europe.
-- Aquilant's underlying operating profit(2) increased by 4%, with reported performance negatively impacted by adverse currency translation movements.
-- Further progress on Future Fit investments in scalable infrastructure with the launch of Workday (Group HR system) and commencement of the implementation of Oracle Fusion (Ashfield finance system) to support continued sustainable growth.
-- Alan Ralph, UDG Healthcare's CFO, has signalled his intention to retire from his role by the end of 2018. A comprehensive process is underway to appoint a suitable successor.
Chief Executive's comment
Commenting on the performance, Chief Executive Officer, Brendan McAtamney said:
"2017 was another year of strong growth at UDG Healthcare, with adjusted earnings per share increasing by 17% (23% on a constant currency basis). All our divisions delivered good underlying profit growth, supplemented by the benefit of acquisitions.
We continued to transform UDG Healthcare, committing more than $270 million to six transactions during the year. These acquisitions enhance and broaden the range of capabilities we offer our healthcare clients. We are well positioned to continue to deliver organic growth and our strong balance sheet will enable us to execute further strategic acquisition opportunities as they arise.
UDG Healthcare's value proposition to our clients continues to expand and the Group also continues to benefit from the increasing trend in the healthcare industry to outsource specialist and non-core activities on an international basis."
(1) Before the amortisation of acquired intangible assets and transaction costs.
(2) Underlying growth is reported growth adjusted for the impact of currency translation movements and any acquisition or disposal activity.
(3) Operating margin as a percentage of net revenue. Net revenue represents gross revenue adjusted for revenue associated with pass-through
costs, for which the Group does not earn a margin.
Group development and outlook
Corporate development activity
In line with the Group's strategy of expanding into higher growth and higher margin areas, 2017 saw the Group commit more than $270 million to six acquisitions. The Group has now redeployed over two thirds of the net proceeds from the 2016 sale of the United Drug supply chain business to McKesson.
These acquisitions have a strong strategic fit with the Group's existing businesses and have added further capabilities for the Group's healthcare clients. All have performed well since acquisition and are:
-- STEM Healthcare, a leading global provider of commercial, marketing and medical audits, completed October 2016;
-- A pharmaceutical-grade packaging facility in Bethlehem, PA, completed April 2017; -- Sellxpert, a German and Swiss contract sales outsourcing business, completed July 2017; -- Vynamic, a US-based healthcare management consultancy, completed July 2017;
-- Cambridge BioMarketing, a US-based communications agency focused on orphan and rare diseases, completed July 2017;
-- MicroMass Communications, a US-based communications agency specialising in behavioural change, completed September 2017.
At year end, the Group's net debt was $53.3m (0.32x net debt to EBITDA), leaving it well placed to execute further strategic acquisition opportunities as they arise.
Board and Management changes
After almost 20 years with the Group, UDG Healthcare Chief Financial Officer, Alan Ralph, has informed the Board that he intends to retire from his role by the end of 2018. Chief Executive Officer, Brendan McAtamney, commented "Alan has made a substantial contribution to the evolution of UDG Healthcare, particularly in his current role as Chief Financial Officer. Over the years, Alan has held many roles within the Group, including Managing Director of the Supply Chain Division. At all times, Alan has been a model professional and has made a significant input into the formulation of the Group's strategy and its successful international expansion. On behalf of the Group, we are very thankful for Alan's contribution to UDG Healthcare and we wish him and his family the very best for the future. On a personal note, I would like to thank Alan for his wise counsel and firm support since my appointment as Chief Executive. Whilst there is no firm retirement date as yet, Alan will remain with the Group to ensure a smooth succession." Planning for Chief Financial Officer succession is in progress and a replacement will be announced in due course.
In May 2017, Jez Moulding was appointed Chief Operating Officer of the Group and Executive Vice President of Ashfield. This followed the announcement in September 2016 of Chris Corbin's intention to retire from the Group in April 2019. Chris has transitioned to the role of Chairman of Ashfield and remains a director of the Group.
Gerard van Odjik has informed the Chairman that, having recently taken on a demanding new role, he will be unable to give UDG Healthcare the time and attention that his non-executive director role requires. He has therefore indicated that he will not seek re-election at the upcoming AGM on 30 January 2018. In the light of this, the Board has asked Philip Toomey, who was going to step down at the AGM, to put himself forward for a further year.
Ashfield service offering & office expansion
Driven by five acquisitions during the year, Ashfield continued to broaden and enhance its service proposition. The acquisitions of STEM Healthcare and Vynamic have significantly expanded Ashfield's advisory offering. Together with Sellxpert, Cambridge BioMarketing and MicroMass Communications, these acquisitions enable Ashfield to deliver a full range of end-to-end advisory, communication, commercial and clinical services to its clients. Over the past five years, Ashfield has transitioned from a UK focused commercial and clinical services business, to become a global commercialisation partner for its healthcare clients.
To facilitate continued growth of the Ashfield business, Ashfield's commercial and clinical operations in the US moved to a new facility in Fort Washington, PA, in 2017. This is 60% larger than the previous office, enabling continued expansion in the strategically important US market. Ashfield Communications also doubled the size of its office in Scotland and opened new offices in Ireland and Japan.
Sharp investments
Sharp continued to invest in new facilities in the US and the UK. During the second half of the year, Sharp's US clinical business commenced its relocation to the Bethlehem packaging facility acquired in April 2017. The relocation is expected to be completed over the next 18 months. The facility will offer clients an integrated clinical development, packaging and distribution service. In the UK, the relocation of the clinical packaging business to the recently purchased facility in South Wales will commence once the refurbishment of the facility is completed in late 2018.
Future Fit
As well as successfully executing these acquisitions and facility improvements, the Group remains focused on investing in scalable infrastructure across HR, finance and IT. In April 2017, the Group launched Workday, its human resource information system and commenced the implementation of Ashfield's new Oracle Fusion finance system, which will be rolled-out on a phased basis over the next 18 months. These investments will ensure the Group has the right infrastructure to deliver long term sustainable growth and ensure the seamless integration of acquired businesses.
The rollout of both systems resulted in $2.5m additional operating costs during the second half of this year (primarily in Ashfield). In H1 2018, a further $3.5m increase in operating costs is expected (annualised impact of c. $6m) which will moderate organic growth during the first half of 2018.
Outlook
During 2017 the Group made significant progress in the execution of its strategy. The market opportunity for UDG Healthcare remains robust and the Group is well positioned to deliver sustainable future growth, both organically and through further strategic acquisitions.
2018 will benefit from the full year contribution of acquisitions made in 2017 and the Group expects organic growth to accelerate during the second half of the year, after the impact of the additional Future Fit operating costs have been absorbed.
Review of Operations
Ashfield
2017 2016 Actual Underlying $'m $'m Growth Growth(2) ---------------------------- ------ ------ ------- ----------- Gross revenue Commercial & Clinical 604.7 525.1 15% 18% Communications (including Advisory) 216.7 159.9 36% 1% Total gross revenue 821.4 685.0 20% 14% Net revenue(1) Commercial & Clinical 442.3 386.3 14% 17% Communications (including Advisory) 187.8 135.3 39% 1% Total net revenue 630.1 521.6 21% 13% Operating profit Commercial & Clinical 38.6 37.8 2% 5% Communications (including Advisory) 43.0 32.8 31% 5% Total operating profit 81.6 70.6 16% 5% Operating margin Operating margin (on gross revenue) 9.9% 10.3% Net operating margin (on net revenue) 12.9% 13.5% ---------------------------- ------ ------ ------- -----------
(1) Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin. There are no pass-through costs in Sharp or Aquilant.
(2) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
Ashfield delivered a strong financial performance during the year, driven by good underlying growth and the benefit of acquisitions. Net revenue was up 21% to $630.1m and operating profit was up 16% to $81.6m.
Ashfield generated underlying net revenue growth of 13% and underlying operating profit growth of 5%, after adjusting for the negative impact of currency translation movements and the contribution of acquisitions.
Ashfield incurred additional operating costs during the second half of the year (expected to continue into the first half of 2018) related to the Future Fit investments. Ashfield generated 8% underlying operating profit growth during the year before these additional costs, which amounted to c. $2.5m in the second half of 2017.
Net operating margin (allowing for pass-through costs) declined from 13.5% to 12.9%. The positive margin impact of acquisitions was more than offset by the impact of the additional Future Fit operating costs and higher underlying revenue growth from the lower margin Commercial & Clinical business.
Ashfield Commercial & Clinical delivered good underlying net revenue and operating profit growth of 17% and 5% respectively during the year. This was principally due to strong growth in the German business and a good performance in the US, driven by increased activity on contract wins from 2016. The acquisition of Sellxpert has further strengthened Ashfield's capabilities and established it as market leader in Germany.
Ashfield Communications (including Advisory) delivered strong growth during the year. Including the benefit of acquisitions, net revenue increased by 39% and operating profit increased by 31%. Underlying net revenue growth improved during the second half of the year compared to the first half of the year. Since its acquisition in October 2016, STEM Healthcare has performed strongly and continues to gain momentum.
In addition to continued organic progress, Ashfield is well positioned for growth in 2018 following the acquisitions of Sellxpert, Vynamic, Cambridge BioMarketing and MicroMass Communications during the final quarter of 2017.
Sharp
2017 2016 Actual Underlying $'m $'m Growth Growth(1) ------------------------- ------ ------ ------- ----------- Revenue US 254.0 246.1 3% 2% Europe 48.1 49.9 (4%) 1% Total revenue 302.1 296.0 2% 2% Operating profit/(loss) US 40.9 39.6 3% 5% Europe 0.4 (1.4) - - Total operating profit 41.3 38.2 8% 11% Operating margin % 13.7% 12.9% ------------------------- ------ ------ ------- -----------
(1) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
Sharp delivered a good performance in 2017, with operating profit increasing by 8% to $41.3m (11% on an underlying basis). Operating margins increased to 13.7% during the year.
Sharp US generated underlying operating profit growth of 5%, with biotech delivering particularly strong growth. This was in part driven by the completion of the fit out of the additional capacity in Allentown, PA, which contains 13 packaging suites fully dedicated to biotech clients.
In addition, a new US state-of-the-art packaging site was acquired in Bethlehem, PA, in April 2017 to expand the commercial and clinical offering to Sharp's US clients. Sharp's US clinical business is currently relocating to this facility.
Sharp Europe moved into operating profit following a number of years of operating losses. Underlying revenue growth was 1% as the business exited some unprofitable contracts and shifted its focus to higher margin business. Sharp Europe is increasingly well positioned to deliver future profitable growth given the improving business development pipeline, focused on injectable biotech and biosimilar products.
The ongoing investment in Sharp's facilities continues to improve capabilities and expand capacity. Notwithstanding the one year delay in enforcement of the serialisation 'Track & Trace' requirement by the U.S. Food and Drug Administration (FDA) and supply chain disruptions with some clients following the recent hurricane in Puerto Rico, Sharp is well positioned to deliver underlying operating profit growth in line with the Group's medium-term guidance into 2018 and beyond.
Aquilant
2017 2016 Actual Underlying $'m $'m Growth Growth(1) -------------------- ----- ------ ------- ----------- Revenue 96.3 102.4 (6%) 2% Operating profit 6.4 6.9 (7%) 4% Operating margin % 6.6% 6.7% -------------------- ----- ------ ------- -----------
(1) Underlying growth adjusts for the impact of currency translation movements. There was no acquisition or disposal activity in 2016 or 2017.
Revenue was 6% behind the prior year. Adjusting for negative currency translation movements, underlying revenue was 2% ahead of 2016.
Underlying operating profit was 4% ahead of 2016 reflecting a continued improvement in sales mix, including capital equipment sales, and the full benefit of new business which came on stream in 2016. Reported operating profit was 7% behind the prior year due to adverse currency translation movements.
Analyst presentation
A presentation for investors and analysts will be held at the London Stock Exchange at 8.30 GMT today, Tuesday, 28 November 2017. If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows:
Audio webcast
https://edge.media-server.com/m6/p/ypnmwqt7
Conference call
UK number: +44-203-427-1916
Ireland number: + 353-1-246-5603
US number: +1-646-254-3366
Participant code: 9761269
If you wish to ask questions, please do so via the conference call.
A replay of the audio webcast can be accessed via the same webcast link above.
For further information, please contact: Investors and Analysts: Alan Ralph Keith Byrne CFO Head of IR, Strategy & Corporate UDG Healthcare plc Communications Tel: + 353-1-468-9000 UDG Healthcare plc Tel: + 353-1-468-9000 Business / Financial media: Lisa Kavanagh / Jack Hickey Powerscourt Tel: + 44-207-250-1446
About UDG Healthcare plc
UDG Healthcare plc (LON: UDG) is a leading international partner of choice delivering commercial, clinical, communications and packaging services to the healthcare industry, employing over 9,000 people with operations in 24 countries and delivering services in over 50 countries.
UDG Healthcare plc operates across three divisions: Ashfield, Sharp and Aquilant.
Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across two broad areas of activity: commercial & clinical services, and communications services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.
Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state-of-the-art facilities in the US and Europe.
Aquilant is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands.
The company is listed on the London Stock Exchange and is a constituent of the FTSE 250.
For more information, please go to: www.udghealthcare.com
Forward-looking information
Some statements in this announcement are or may be forward looking statements. They represent expectations for the Group's business, including statements that relate to the Group's future prospects, developments and strategies, and involve risks and uncertainties both general and specific. The Group has based these forward-looking statements on assumptions regarding present and future strategies of the Group and the environment in which it will operate in the future. However, because they involve known and unknown risks, uncertainties and other factors including but not limited to general economic, political, financial and business factors, which in some cases are beyond the Group's control, actual results, performance, operations or achievements expressed or implied by such forward looking statements may differ materially from those expressed or implied by such forward-looking statements and accordingly you should not rely on these forward looking statements in making investment decisions. Except as required by applicable law or regulation, neither the Group nor any other party intends to update or revise these forward-looking statements after the date these statements are published, whether as a result of new information, future events or otherwise.
Finance Review
for the year ended 30 September 2017
Revenue
Revenue of $1,219.8 million for the year was 13% ahead of 2016. Underlying revenue growth was 10% ahead, excluding the impact of foreign exchange and acquisitions. Ashfield increased underlying revenue by 14% while Sharp and Aquilant both reported revenue 2% ahead of 2016 excluding the impact of foreign exchange and acquisitions.
Adjusted operating profit
Adjusted operating profit from continuing operations of $129.3 million is 12% ahead (17% on a constant currency basis) of 2016.
Adjusted net operating margin
The adjusted net operating margin for the year of 12.6% was the same as 2016. The positive margin effect of acquisitions was offset by the impact of additional Future Fit operating costs and relatively higher revenue growth in the lower margin Ashfield Commercial & Clinical business.
Adjusted profit before tax
Net interest costs for the year of $10.4 million are 26% lower than 2016, which is as a result of the repayment of the RCF bank facility in April 2016 and increased interest income following the disposal of the United Drug Supply Chain businesses in 2016. This delivered a profit before tax from operations of $118.9 million which is 17% ahead of 2016 (23% on a constant currency basis).
Taxation
The effective taxation rate has decreased from 22.7% in 2016 to 22.2% in 2017.
Adjusted diluted earnings per share
Earnings per share (EPS) from continuing operations is 17% ahead (23% on a constant currency basis) of 2016 at 37.12 $ cent. Underlying EPS increased by 13% excluding acquisitions completed during the year and unfavourable currency movements.
US Dollar reporting
In August 2016, the Group announced that it would change its reporting currency to US Dollar for the 2017 financial year as the majority of Group profits are now derived from the US. This Preliminary Announcement is presented in US Dollar and further details on the change in presentational currency are included in note 20.
The Group operates in 24 countries, with its primary foreign exchange exposure being the translation of local income statements and balance sheets into US Dollar for Group reporting purposes. The primary non-Dollar currencies are Sterling and Euro. The re-translation of overseas profits to US Dollar has decreased constant currency EPS growth of 23% to a reported EPS growth rate of 17%, which is primarily due to the weakness in Sterling in the first nine months of 2017 versus the same period in 2016.
The average 2017 exchange rates were $1:EUR0.9047 and $1:GBP0.7891 (2016 $1:EUR0.9002 and $1:GBP0.7045).
Discontinued operations
The Group has classified its joint venture arrangement with Magir Limited as a discontinued operation and asset held for sale. Discontinued operations in the prior year also included United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA, which were disposed of on 1 April 2016.
Cash flow
The Group moved from a net cash position of $143.2 million in 2016 to a net debt position of $53.3 million in 2017. This was primarily as a result of 2017 acquisition activity. The net cash inflow from operating activities was $107.8 million.
$51.4 million was invested in property, plant and equipment and computer software. This includes IT investment to enable our businesses to grow in an efficient manner and investment in the new facility in Sharp UK. $198.4 million was paid in initial consideration for the acquisition of STEM Healthcare, the Bethlehem packaging facility, Vynamic, Cambridge BioMarketing, Sellxpert and MicroMass while the Group also paid $14.3 million in deferred contingent consideration associated with current and prior year acquisitions. Dividend payments of $31.3 million relating to the final 2016 dividend and the 2017 interim dividend were made during the year.
Balance sheet
Net debt at the end of the year was $53.3 million ($187.5 million cash and $240.8 million debt). The net (debt)/cash to annualised EBITDA ratio is 0.32 times debt (2016: 1.05 times cash) and net interest is covered 16.3 times (2016: 10.6 times) by annualised EBITDA. Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.
The Group has retained its long term private placement debt as it expects to make acquisitions and other capital investments in the coming years. The Group made a scheduled repayment of $63.3 million in September 2017 of maturing private placement notes. At 30 September 2017, the Group also had $259.7 million of undrawn overdraft and loan facilities.
Return on capital employed (ROCE)
The ROCE for continuing operations was 12.8%, down from 13.6% at the end of 2016. Details on how this was calculated are on page 37. ROCE was 13.2% excluding the impact of acquisitions, most of which were acquired in the final quarter. ROCE has been impacted by the capital expenditure investment in 2017.
Dividends
The directors are proposing a final dividend of 9.72 $ cent per share representing an increase of 7.5% on the 2016 final dividend of 9.04 $ cent per share. This represents 7% growth in the total dividend for the year to 13.30 $ cent per share. This continues the Group's 30 year history of consistently increasing dividends.
Subject to shareholder approval at the Company's Annual General Meeting, the proposed final dividend of 9.72 $ cent per share will be paid on 5 February 2018 to ordinary shareholders on the Company's register at 5.00 p.m. on 12 January 2018.
Investor relations
UDG Healthcare's senior management team spend a significant amount of time meeting with shareholders and the international financial community. We have invested in dedicated investor relations resources and are focussed on increasing the awareness of the Group among the investor and analyst community.
We communicate regularly with our shareholders during the year, specifically following the release of our interim and preliminary results, and at the time of major developments including M&A transactions. During 2017, the executive management team attended and presented at eleven investor conferences, including four in the US, and conducted over 230 institutional investor one-on-one meetings. In addition, our Chairman Peter Gray, held a number of governance meetings with existing shareholders during the year, both in the UK and US. The number of independent equity analysts covering the Group increased to ten during the year reflecting the growing interest in UDG Healthcare from the equity markets.
The Board of Directors considers it important to understand the views of shareholders and receive regular updates on investor perceptions.
Our website www.udghealthcare.com, is the primary method of communication for the majority of our shareholders. We publish our annual report, preliminary results and other public announcements on our website. In addition, details of our conference calls and presentations are available through our website.
Our investor relations department provides a point of contact for shareholders and full contact details are set out in the investor relations section of our website. Shareholders can also submit an information request through the shareholder services section of our website.
Group Income Statement
for the year ended 30 September 2017
As re-presented and restated Year ended Year ended 30 September 2016 30 September 2017 Note $'000 $'000 Continuing operations Revenue 4 1,219,755 1,083,439 Cost of sales (871,909) (767,833) --------------------------------- ----- ----------------------------- ----------------------------------------- Gross profit 347,846 315,606 Selling and distribution expenses (192,536) (177,543) Administration expenses (23,313) (20,854) Other operating expenses (25,450) (18,213) Transaction costs (4,028) (2,214) Share of joint ventures' profit after tax 5 667 798 --------------------------------- ----- ----------------------------- ----------------------------------------- Operating profit 103,186 97,580 Finance income 6 18,905 5,311 Finance expense 6 (29,257) (19,349) --------------------------------- ----- ----------------------------- ----------------------------------------- Profit before tax from continuing operations 92,834 83,542 Income tax expense (20,976) (15,428) --------------------------------- ----- ----------------------------- ----------------------------------------- Profit for the year from continuing operations 71,858 68,114 Profit after tax for the year from discontinued operations 7 - 150,409 --------------------------------- ----- ----------------------------- ----------------------------------------- Profit for the financial year 71,858 218,523 --------------------------------- ----- ----------------------------- ----------------------------------------- Profit attributable to: Continuing operations 71,858 68,114 Discontinued operations - 150,409 --------------------------------- ----- ----------------------------- ----------------------------------------- 71,858 218,523 --------------------------------- ----- ----------------------------- ----------------------------------------- Earnings per ordinary share: Basic - continuing operations 8 28.97c 27.64c Basic - discontinued operations 8 - 61.04c --------------------------------- ----- ----------------------------- ----------------------------------------- Basic 28.97c 88.68c --------------------------------- ----- ----------------------------- ----------------------------------------- Diluted - continuing operations 8 28.83c 27.53c Diluted - discontinued operations 8 - 60.79c --------------------------------- ----- ----------------------------- ----------------------------------------- Diluted 28.83c 88.32c --------------------------------- ----- ----------------------------- -----------------------------------------
Group Statement of Comprehensive Income
for the year ended 30 September 2017
As re-presented and restated 2017 2016 Notes $'000 $'000 Profit for the financial year 71,858 218,523 Other comprehensive income/(expense): Items that will not be reclassified to profit or loss: Remeasurement gain/(loss) on Group defined benefit schemes 15 * Continuing operations 11,098 (9,409) * Discontinued operations - 1,177 Deferred tax on Group defined benefit schemes * Continuing operations (599) 599 * Discontinued operations - (232) --------------------------------------- ------ --------- ------- --------- ------------------
10,499 (7,865) --------------------------------------- ------ --------- ------- --------- ------------------ Items that may be reclassified subsequently to profit or loss: Foreign currency translation adjustment 11 * Continuing operations 10,109 (60,031) * Discontinued operations - (2,045) Reclassification on loss of control of subsidiary undertakings 11 - 5,283 Group cash flow hedges: - Effective portion of cash flow hedges - movement into reserve (15,271) (5,483) - Effective portion of cash flow hedges - movement out of reserve 14,865 (896) --------- --------- Effective portion of cash flow hedges 11 (406) (6,379) - Movement in deferred tax - movement into reserve 1,909 685 - Movement in deferred tax - movement out of reserve (1,858) 113 --------- --------- Net movement in deferred tax 11 51 798 --------------------------------------- ------ --------- ------- --------- ------------------ 9,754 (62,374) --------------------------------------- ------ --------- ------- --------- ------------------ Other comprehensive income/(expense), net of tax 20,253 (70,239) --------------------------------------- ------ --------- ------- --------- ------------------ Total comprehensive income, net of tax, attributable to equity holders of the parent 92,111 148,284 --------------------------------------- ------ --------- ------- --------- ------------------ Total comprehensive income/(expense) attributable to: Continuing operations 92,111 (6,308) Discontinued operations - 154,592 --------------------------------------- ------ --------- ------- --------- ------------------ 92,111 148,284 --------------------------------------- ------ --------- ------- --------- ------------------
Group Statement of Changes in Equity
for the year ended 30 September 2017
Equity Other Attributable to share Share Retained reserves owners of the Non-controlling Total capital premium earnings (note 11) parent interest equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2016 14,535 187,355 784,432 (179,446) 806,876 - 806,876 Profit for the financial year - - 71,858 - 71,858 - 71,858 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - (406) (406) - (406) Deferred tax on cash flow hedges - - - 51 51 - 51 Translation adjustment - - - 10,109 10,109 - 10,109 Remeasurement gain on defined benefit schemes - - 11,098 - 11,098 - 11,098 Deferred tax on defined benefit schemes - - (599) - (599) - (599) Total comprehensive income for the year - - 82,357 9,754 92,111 - 92,111 Transactions with shareholders: New shares issued 46 3,129 - - 3,175 - 3,175 Issued in business combination 39 6,012 - - 6,051 - 6,051 Share-based payment expense - - - 3,613 3,613 - 3,613 Dividends paid to equity holders - - (31,279) - (31,279) - (31,279) Release from share-based payment reserve - - 577 (577) - - - Non-controlling interest arising on acquisition - - - - - 109 109 At 30 September 2017 14,620 196,496 836,087 (166,656) 880,547 109 880,656 ------------------- --------- -------- ------------- ---------- ----------------- ---------------- ----------
for the year ended 30 September 2016
Other Total equity as Equity Share Retained reserves re-presented share capital premium $'000 earnings $'000 (note 11) $'000 and restated $000 $'000 --------------------------------------------- -------------- --------------- ----------------- ------------------------- At 1 October 2015 14,430 183,000 600,793 (116,219) 682,004 Profit for the financial year - - 218,523 - 218,523 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - (6,379) (6,379) Deferred tax on cash flow hedges - - - 798 798 Translation adjustment * Continuing operations - - - (60,031) (60,031) * Discontinued operations - - - (2,045) (2,045) Reclassification on loss of control of subsidiary undertakings - - - 5,283 5,283 Remeasurement (loss)/gain on defined benefit schemes * Continuing operations - - (9,409) - (9,409) * Discontinued operations - - 1,177 - 1,177 Deferred tax on defined benefit schemes * Continuing operations - - 599 - 599 * Discontinued operations - - (232) - (232) ------------------------------------- ------- -------------- --------------- ----------------- ------------------------- Total comprehensive income/(expense) for the year - - 210,658 (62,374) 148,284 Transactions with shareholders: New shares issued 105 4,355 - - 4,460 Share-based payment expense - - - 2,184 2,184 Dividends paid to equity holders - - (30,056) - (30,056) Release from share-based payment reserve - - 3,037 (3,037) - ------------------------------------- ------- -------------- --------------- ----------------- ------------------------- At 30 September 2016 14,535 187,355 784,432 (179,446) 806,876 ------------------------------------- ------- -------------- --------------- ----------------- -------------------------
Group Balance Sheet
as at 30 September 2017
As re-presented (note 20) As re-presented (note 20) 2016 2015 $'000 $'000 2017 Note $'000 ASSETS Non-current Property, plant and equipment 9 168,403 136,877 132,087 Goodwill 10 542,554 384,520 401,306 Intangible assets 10 227,617 108,322 113,927 Investment in joint ventures and associates 10 8,838 9,067 25,855 Derivative financial instruments 12 1,302 13,185 24,700 Deferred income tax assets 4,025 4,296 4,463 Employee benefits 15 12,379 13,939 14,639 Total non-current assets 965,118 670,206 716,977 ------------------------------------- ------ --------------- -------------------------- -------------------------- Current Inventories 55,060 54,941 61,636 Trade and other receivables 307,388 233,791 229,939 Cash and cash equivalents 12 187,469 428,729 239,832 Current income tax assets 2,464 4,532 1,806 Derivative financial instruments 12 2,450 8,239 5,321 Assets held for sale 7 - - 530,821 Total current assets 554,831 730,232 1,069,355 ------------------------------------- ------ --------------- -------------------------- -------------------------- Total assets 1,519,949 1,400,438 1,786,332 ------------------------------------- ------ --------------- -------------------------- -------------------------- EQUITY Equity share capital 14,620 14,535 14,430 Share premium 196,496 187,355 183,000 Other reserves 11 (166,656) (179,446) (116,219) Retained earnings 836,087 784,432 600,793 ------------------------------------- ------ --------------- -------------------------- -------------------------- Equity attributable to owners of the parent 880,547 806,876 682,004 Non-controlling interest 109 - - Total equity 880,656 806,876 682,004 ------------------------------------- ------ --------------- -------------------------- -------------------------- LIABILITIES Non-current Interest-bearing loans and borrowings 12 244,077 242,108 465,866 Provisions 13 58,470 6,084 8,411 Employee benefits 15 3,162 20,442 20,505 Deferred income tax liabilities 54,279 31,008 31,424 Derivative financial instruments 12 352 - - Total non-current liabilities 360,340 299,642 526,206 ------------------------------------- ------ --------------- -------------------------- -------------------------- Current Interest-bearing loans and borrowings 12 58 64,882 23,315 Trade and other payables 248,145 204,468 214,831 Current income tax liabilities 16,845 14,587 4,988 Provisions 13 13,905 9,983 20,931 Liabilities held for sale 7 - - 314,057 Total current liabilities 278,953 293,920 578,122 ------------------------------------- ------ --------------- -------------------------- -------------------------- Total liabilities 639,293 593,562 1,104,328 ------------------------------------- ------ --------------- -------------------------- -------------------------- Total equity and liabilities 1,519,949 1,400,438 1,786,332 ------------------------------------- ------ --------------- -------------------------- --------------------------
Group Cash Flow Statement
for the year ended 30 September 2017
2016 (as re-presented) Continuing operations Discontinued operations 2017 Total $'000 $'000 $'000 $'000 Cash flow from operating activities Profit before tax 92,834 83,542 151,220 234,762 Finance income (18,905) (5,311) (8) (5,319) Finance expense 29,257 19,349 64 19,413 ------------------------------------ ------------ ---------------------- ------------------------ ---------- Operating profit 103,186 97,580 151,276 248,856 Share of joint ventures' profit after tax (667) (798) (1,659) (2,457) Depreciation charge 21,221 20,032 - 20,032 Loss/(profit) on disposal of property, plant and equipment 55 71 (12) 59 Impairment of intangible assets - 798 1,133 1,931 Amortisation of intangible assets 25,450 18,213 - 18,213 Share-based payment expense 3,613 2,184 - 2,184 Decrease in inventories 1,893 3,452 3,870 7,322 Increase in trade and other receivables (24,612) (9,783) (10,074) (19,857) Increase/(decrease) in trade payables, provisions and other payables 2,934 (8,663) (32,081) (40,744) Exceptional items paid (165) (2,564) - (2,564) Profit on disposal of discontinued operations - - (150,780) (150,780) Impairment of asset held for sale - - 18,842 18,842 Interest paid (10,608) (12,201) - (12,201) Income taxes paid (14,522) (13,716) (777) (14,493) ------------------------------------ ------------ ---------------------- ------------------------ ---------- Net cash inflow/(outflow) from operating activities 107,778 94,605 (20,262) 74,343 ------------------------------------ ------------ ---------------------- ------------------------ ---------- Cash flows from investing activities Interest received 1,044 663 8 671 Purchase of property, plant and equipment (29,466) (31,736) (2,533) (34,269) Proceeds from disposal of property, plant and equipment 146 435 12 447 Investment in intangible assets - computer software (21,884) (10,926) (6,648) (17,574) Acquisitions of subsidiaries (net
of cash and cash equivalents acquired) (198,439) (14,446) - (14,446) Deferred contingent acquisition consideration paid (14,265) (17,331) - (17,331) Disposal of subsidiary undertakings (net of cash and cash equivalents disposed) - 447,112 (21,389) 425,723 ------------------------------------ ------------ ---------------------- ------------------------ ---------- Net cash (outflow)/inflow from investing activities (262,864) 373,771 (30,550) 343,221 ------------------------------------ ------------ ---------------------- ------------------------ ---------- Cash flows from financing activities Proceeds from issue of shares (including share premium thereon) 3,175 4,460 - 4,460 Repayments of interest-bearing loans and borrowings (63,266) (178,696) - (178,696) Group transfers - 2,879 (2,879) - Decrease in finance leases (3) (80) - (80) Dividends paid to equity holders of the Company (31,279) (30,056) - (30,056) ------------------------------------ ------------ ---------------------- ------------------------ ---------- Net cash outflow from financing activities (91,373) (201,493) (2,879) (204,372) ------------------------------------ ------------ ---------------------- ------------------------ ---------- Net (decrease)/increase in cash and cash equivalents (246,459) 266,883 (53,691) 213,192 Translation adjustment 5,199 (24,295) Cash and cash equivalents at beginning of year 428,729 239,832 ------------------------------------ ------------ ---------------------- ------------------------ ---------- Cash and cash equivalents at end of year 187,469 428,729 ------------------------------------ ------------ ---------------------- ------------------------ ---------- Cash and cash equivalents is comprised of: Cash at bank and short term deposits 187,469 428,729 ------------------------------------ ------------ ---------------------- ------------------------ ----------
Notes to the Preliminary Announcement
for the year ended 30 September 2017
1. Reporting entity
UDG Healthcare plc (the "Company") is a company domiciled in Ireland. The preliminary consolidated financial information for the year ended 30 September 2017 is for the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in joint ventures and associates.
The financial information presented herein does not represent statutory financial statements that are required by Section 347 of the Companies Act, 2014 to be annexed to the annual return of the Company. The financial information does not include all the information and disclosures required in the annual financial statements. The statutory financial statements for the year ended 30 September 2016 have been annexed to the annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis. The statutory financial statements for the year ended 30 September 2017 will be annexed to the next annual return of the Company and filed with the Registrar of Companies.
2. Statement of compliance
This announcement has been prepared on the basis of the results and financial position that the directors expect will be reflected in the audited statutory accounts when these are completed.
The financial information presented in this report has been prepared in accordance with the Group's accounting policies under International Financial Reporting Standards (IFRS), as adopted by the EU and as set our more fully in the Group's last Annual Report.
The accounting policies adopted are consistent with those of the previous year except for the change in the Group's presentation currency from Euro to US Dollar and the following new and amended IFRSs and International Financial Reporting Interpretations Committee (IFRIC) interpretations that were adopted by the Group as of 1 October 2016:
-- Amendments to IAS 27: Equity method in Separate Financial Statements -- Amendments to IAS 1: Disclosure initiative -- Amendments to IFRS 11: Accounting for acquisitions of interests in Joint Operations -- Annual Improvements to IFRSs 2012-2014 Cycle;
-- Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortisation
These are effective for the Group's financial year ended 30 September 2017 but did not have a material effect on the results or financial position of the Group.
The IASB and the International Financial Reporting Interpretations Committee (IFRIC) have issued the following standards, amendments to existing standards and interpretations that are not yet effective for the Group:
-- Annual Improvements to IFRSs 2014-2016 Cycle IFRS 14: Regulatory Deferral Accounts (*) -- IFRIC Interpretation 23: Uncertainty over Income Tax Treatments (*) -- IFRIC Interpretation 22: Foreign Currency Transactions and Advance Consideration (*) -- Amendments to IAS 7: Disclosure Initiative -- Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses -- Amendments to IAS 28: Long term interests in Associates and Joint Ventures (*) -- Amendments to IAS 40: Transfers of Investment Property (*)
-- Amendments to IFRS 2: Classification and measurement of share-based payment transactions (*)
-- IFRS 9: Financial Instruments (2014)
-- Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint ventures (*)
-- Clarifications to IFRS 15: Revenue from Contracts with Customers (*) -- IFRS 16: Leases (*)
A number of the standards (*) set out above have not yet been EU endorsed. These standards, interpretations and amendments to existing standards will be applied for the purposes of the Group and Company Financial Statements with effect from their respective effective dates. The Group is currently considering the impact of the above interpretations and amendments.
3. Prior year reclassification
Reclassification of revenue
Pass-through revenues relate to the recharging of travel and other costs to customers at zero margin. There has been a reclassification of certain pass-through revenue from cost of sales to revenue. As a result, $35,771,000 (EUR32,200,000) has been reclassified from cost of sales to revenue so that the results are presented on a consistent basis in both 2017 and 2016. There is no impact on gross profit.
A summary of the impact on the previously reported figures is set out below:
As previously Reclassification As restated As re-presented stated EUR'000 EUR'000 $'000 EUR'000 -------------- -------------- ----------------- ------------ ---------------- Revenue 943,080 32,200 975,280 1,083,439 Cost of Sales (658,981) (32,200) (691,181) (767,833) Gross profit 284,099 - 284,099 315,606 -------------- -------------- ----------------- ------------ ----------------
4. Segmental analysis
The Group's operations are divided into the following operating segments each of which operates in a distinct sector of the healthcare services market:
Ashfield - Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across three broad areas of activity: advisory, communications and commercial & clinical services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.
Sharp - Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state of the art facilities in the US and Europe.
Aquilant - Aquilant is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands.
At 30 September 2017 the Group has classified the joint venture investment in Magir Limited as a discontinued operation and an asset held for sale. Details of the discontinued operations are included in note 7. The segmental analysis of the business corresponds with the Group's organisational structure and the Group's internal reporting for the purpose of managing the business and assessing performance as reviewed by the Group's Chief Operating Decision Maker (CODM), which the Group has defined as Brendan McAtamney (Chief Executive Officer). The amount of revenue and operating profit by segment is as follows:
Continuing operations 2017 2016 as re-presented $'000 $'000 Revenue Ashfield 821,412 685,041 Sharp 302,076 295,992 Aquilant 96,267 102,406 ----------------------------------------------------------------------------------- ---------- --------------------- 1,219,755 1,083,439 ----------------------------------------------------------------------------------- ---------- --------------------- Operating profit before amortisation of acquired intangibles, transaction costs and exceptional items Ashfield 81,567 70,653 Sharp 41,304 38,208 Aquilant 6,409 6,910 ----------------------------------------------------------------------------------- ---------- --------------------- Adjusted operating profit 129,280 115,771 Amortisation of acquired intangibles (22,066) (15,977) Transaction costs (4,028) (2,214) ----------------------------------------------------------------------------------- ---------- --------------------- Operating profit 103,186 97,580 Finance income 18,905 5,311 Finance expense (29,257) (19,349) ----------------------------------------------------------------------------------- ---------- --------------------- Profit before tax 92,834 83,542 Income tax expense (20,976) (15,428) ----------------------------------------------------------------------------------- ---------- --------------------- Profit after tax for the year 71,858 68,114 ----------------------------------------------------------------------------------- ---------- --------------------- Geographical analysis of revenue 2017 2016 as re-presented $'000 $'000 Republic of Ireland 42,178 36,268 United Kingdom 318,934 365,985 North America 629,001 499,498 Rest of World 229,642 181,688 ---------------------------------- ---------- --------------------- 1,219,755 1,083,439 ---------------------------------- ---------- ---------------------
5. Share of joint ventures' profit after tax
2016 as re-presented 2017 $'000 $'000 Revenue 61,883 66,287 Expenses, inclusive of tax (60,549) (64,690) ------------------------------------------------ --------- --------------------- Profit after tax - continuing 1,334 1,597 Group's equity interest 49.99% 49.99% ------------------------------------------------ --------- --------------------- Group's share of profit after tax - continuing 667 798 ------------------------------------------------ --------- ---------------------
6. Finance income and expense
2016 as re-presented 2017 $'000 $'000 Finance income Income arising from cash deposits 1,057 710 Fair value of deferred contingent consideration - 294 Fair value of cash flow hedges transferred from equity - 896 Fair value adjustment to guaranteed senior unsecured loan notes 2,840 3,157 Foreign currency gain on retranslation of guaranteed senior unsecured loan notes 14,865 - Ineffective portion of cash flow hedges 76 254 Net finance income on pension scheme obligations 67 - Finance income relating to continuing operations 18,905 5,311 Finance income relating to discontinued operations - 8 ----------------------------------------------------------------------------------- --------- --------------------- 18,905 5,319 ----------------------------------------------------------------------------------- --------- --------------------- Finance expense Interest on overdrafts (46) (31) Interest on bank loans and other loans -wholly repayable within 5 years (5,482) (7,761) -wholly repayable after 5 years (5,641) (5,686) Interest on finance leases (3) (1) Unwinding of discount on provisions (380) (1,158) Fair value of deferred contingent consideration - (647) Fair value adjustments to fair value hedges (2,840) (3,157) Fair value of cash flow hedges transferred to equity (14,865) - Foreign currency loss on retranslation of guaranteed senior unsecured loan notes - (896) Net finance cost on pension scheme obligations - (12) ----------------------------------------------------------------------------------- --------- --------------------- Finance expense relating to continuing operations (29,257) (19,349) ----------------------------------------------------------------------------------- --------- --------------------- Finance expense on pension scheme obligations relating to discontinued operations - (64) ----------------------------------------------------------------------------------- --------- --------------------- (29,257) (19,413) ----------------------------------------------------------------------------------- --------- --------------------- Net finance expense (10,352) (14,094) ----------------------------------------------------------------------------------- --------- ---------------------
7. Net result from discontinued operations, disposals and assets and liabilities classified as held for sale
On 1 April 2016, the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. In accordance with IFRS 5, these businesses were considered to be discontinued. The respective profit and losses on the disposal of these businesses were recognised in the Group Income Statement within discontinued operations.
Profit from discontinued operations after tax included in the prior year Group Income Statement is summarised in the table below:
2016 as re-presented $'000 Profit from discontinued operations after tax * United Drug Supply Chain Services businesses and MASTA (a) 16,812 * Magir Limited (c) 1,659 Profit from disposal of discontinued operations (b) 150,780 Impairment of assets held for sale (c) (18,842) -------------------------------------------------------------- -------- -------------- Profit from discontinued operations after tax 150,409 ------------------------------------------------------------------------ --------------
The profit in the prior year from discontinued operations was fully attributable to the equity holders of the company.
2016 as re-presented (a) $'000 Revenue 750,206 Cost of sales (695,370) -------------------------------------------- -------------- Gross profit 54,836 Selling and distribution expenses (37,281) Administration expenses (2,517) Settlement gain on defined benefit pension 2,641 Operating profit 17,679 Net finance expense (56) -------------------------------------------- -------------- Profit from discontinued operations before tax 17,623 Income tax expense (811) -------------------------------------------- -------------- Profit from discontinued operations after tax 16,812 -------------------------------------------- --------------
In accordance with IFRS 5, depreciation of property, plant and equipment and amortisation of intangibles was not charged on the assets disposed of during the prior year. If the assets had continued to be depreciated and amortised during the prior year, the respective pre-tax charges for the year would have been $3,873,000 and $791,000.
(b) The following tables summarise the consideration received, the profit on disposal of discontinued operations and the net cash flow arising on the disposal of these businesses:
Reconciliation of consideration received to cash received 2016 as re-presented $'000 Total consideration 463,939 Working capital and related adjustments (16,827) Cash received on completion 447,112 Cash and cash equivalents disposed of (21,389) Disposal related costs paid (9,422) ------------------------------------------ ------------- Net consideration received on completion 416,301 ------------------------------------------ ------------- Assets and liabilities disposed of: $'000 Assets: Property, plant and equipment 96,734 Goodwill 16,276 Intangible assets 53,331 Deferred income tax assets 1,126 Inventories 127,922 Trade and other receivables 249,609 --------------------------------------------------------------------------------------------------- ------------- Total assets 544,998 --------------------------------------------------------------------------------------------------- ------------- Liabilities: Deferred income tax liabilities (391) Trade and other payables (287,088) Employee benefits (2,239) Current income tax liability (721) --------------------------------------------------------------------------------------------------- ------------- Total liabilities (290,439) --------------------------------------------------------------------------------------------------- ------------- Net identifiable assets and liabilities disposed of (254,559) Recycling of foreign exchange loss previously recognised in foreign currency translation reserves (5,283) Provision for taxation (5,679) --------------------------------------------------------------------------------------------------- --------- Profit on disposal of discontinued operations after tax 150,780 --------------------------------------------------------------------------------------------------- ---------
(c) During the current and prior year, the Group has treated the joint venture arrangement with Magir as a discontinued operation and asset held for sale in accordance with IFRS 5. Due to the absence of a power sharing administration in Northern Ireland a decision regarding historical and future drug reimbursement rates has not been made and agreeing a value on the business in the absence of this information has not been possible. It remains the intention of the Group to dispose of the asset once the valuation can be properly established.
The following table details the results of this discontinued operation included in the prior year Group Income Statement:
2016 as re-presented $'000 Share of joint ventures' profit after tax 1,659 Impairment charge (18,842) ----------------------------------------- ------------- Loss from discontinued operations after tax (17,183) ----------------------------------------- -------------
The assets and liabilities classified as held for sale in the Group Balance Sheet have a nil carrying value at 30 September 2017 (2016: nil).
8. Earnings per ordinary share
Discontinued operations Continuing operations as as re-presented Total as re-presented Total re-presented 2017 2016 2016 2016 $'000 $'000 $'000 $'000 Profit attributable to the owners of the parent 71,858 68,114 150,409 218,523 Adjustment for amortisation of acquired intangible assets (net of tax) 16,996 8,413 - 8,413 Adjustment for transaction costs (net of tax) 3,658 2,123 - 2,123 Adjustment for profit on disposal (net of tax) - - (150,780) (150,780) Adjustment for impairment of asset held for sale (net of tax) - - 18,842 18,842 Adjusted profit attributable to owners of the parent 92,512 78,650 18,471 97,121 -------------------------- --------- -------------------------- ------------------------- ------------------------ 2017 2016 Number Number of shares of shares Weighted average number of shares 248,001,114 246,405,955 Number of dilutive shares under option 1,238,273 1,016,938 ------------------------------------------------------------ ------------ ------------ Weighted average number of shares, including share options 249,239,387 247,422,893
------------------------------------------------------------ ------------ ------------ Discontinued Continuing operations operations as Total as re-presented re-presented Total as re-presented 2017 2016 2016 2016 Basic earnings per share - cent 28.97 27.64 61.04 88.68 Diluted earnings per share - cent 28.83 27.53 60.79 88.32 Adjusted basic earnings per share - cent 37.30(1) 31.92(1) 7.50(2) 39.42 Adjusted diluted earnings per share - cent 37.12(1) 31.79(1) 7.47(2) 39.26
Non-GAAP information
The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-GAAP measurements provide useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration.
(1) Adjusted profit attributable to equity holders of the parent from continuing operations is stated before the amortisation of acquired intangible assets and transaction costs.
(2) Adjusted profit attributable to equity holders of the parent from discontinued operations is stated after deducting the profit on disposal of the discontinued operations ($150.8m, net of tax), and adding back the impairment of the investment in Magir Limited, an asset held for sale ($18.8m, net of tax).
Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of earnings per share. 2,567,081 (2016: 2,273,772) anti-dilutive share options have been excluded from the calculation of diluted earnings per share.
The average market value of the Company's shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the year.
9. Property, plant and equipment
Land and Plant and Computer Assets under 2017 buildings equipment Motor vehicles equipment construction Total $'000 $'000 $'000 $'000 $'000 $'000 Year ended 30 September 2017 Opening net book amount (as re-presented) 61,093 65,013 290 10,481 - 136,877 Additions in the year 4,151 20,780 30 3,414 1,091 29,466 Arising on acquisition 15,692 5,153 - 593 - 21,438 Depreciation (4,935) (11,620) (62) (4,604) - (21,221) Disposals in year (97) (14) - (90) - (201) Transfer to intangibles - - - (393) - (393) Reclassifications (561) 163 - 398 - - Translation adjustment 1,120 1,089 13 215 - 2,437 ------------------- ---------------- --------------- --------------- ---------------- --------------- ---------- At 30 September 2017 76,463 80,564 271 10,014 1,091 168,403 ------------------- ---------------- --------------- --------------- ---------------- --------------- ---------- At 30 September 2017 Cost or deemed cost 106,815 157,112 738 27,558 1,091 293,314 Accumulated depreciation (30,352) (76,548) (467) (17,544) - (124,911) ------------------- ---------------- --------------- --------------- ---------------- --------------- ---------- Net book amount 76,463 80,564 271 10,014 1,091 168,403 ------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
10. Movement in goodwill, intangible assets and investment in joint ventures and associates
Investment in joint ventures and Intangible associates Goodwill assets $'000 $'000 $'000 Balance at 1 October 2016 (as re-presented) 384,520 108,322 9,067 Investment in computer software - 21,884 - Amortisation of acquired intangible assets - (22,066) - Amortisation of computer software - (3,384) - Arising on acquisitions - computer software - 77 - Arising on acquisitions - other intangible assets 140,626 114,693 - Transfer from property, plant and equipment - 393 - Share of joint ventures' profit after tax - - 667 Measurement period adjustment 1,844 (1,005) - Translation adjustment 15,564 8,703 (896) ------------------------------------------- ----------- ------------- ----------------------------------------- At 30 September 2017 542,554 227,617 8,838 ------------------------------------------- ----------- ------------- -----------------------------------------
11. Other reserves
Share-based Capital Cash flow payment Foreign Treasury redemption hedge exchange shares reserve Total $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2016 (as re-presented) (12,499) 5,956 (165,574) (7,676) 347 (179,446) Effective portion of cash flow hedges (406) - - (406) Deferred tax on cash flow hedges 51 - - - - 51 Share-based payment expense - 3,613 - - - 3,613 Release from share-based payment reserve - (577) - - - (577) Translation adjustment - - 10,109 - - 10,109 ------------------------------------ ------------ ------------ ------------ ------------ ------------ ---------- At 30 September 2017 (12,854) 8,992 (155,465) (7,676) 347 (166,656) ------------------------------------ ------------ ------------ ------------ ------------ ------------ ---------- Share-based Capital Cash flow payment Foreign Treasury redemption hedge exchange shares reserve Total $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2015 (as re-presented) (6,918) 6,832 (108,781) (7,699) 347 (116,219) Effective portion of cash flow hedges (6,379) - - - - (6,379) Deferred tax on cash flow hedges 798 - - - - 798 Share-based payment expense - 2,184 - - - 2,184 Release from share-based payment
reserve - (3,037) - - - (3,037) Translation adjustment * Continuing operations - - (60,031) - - (60,031) * Discontinued operations - - (2,045) - - (2,045) Reclassification on loss of control - - 5,283 - - 5,283 Release of treasury shares on vesting - (23) - 23 - - ------------------------------------ ------------ ------------ ------------ ------------ ------------ ---------- At 30 September 2016 (12,499) 5,956 (165,574) (7,676) 347 (179,446) ------------------------------------ ------------ ------------ ------------ ------------ ------------ ----------
12. Net (debt)/cash
2017 As represented 2016 $'000 $'000 Current assets Cash and cash equivalents 187,469 428,729 Derivative financial instruments 2,450 8,239 Non-current assets Derivative financial instruments 1,302 13,185 Current liabilities Interest bearing loans 72 (64,724) Finance leases (130) (158) Non-current liabilities Interest bearing loans (244,043) (242,099) Finance leases (34) (9) Derivative financial instruments (352) - ---------------------------------- ---------- -------------------- Net (debt)/cash at 30 September (53,266) 143,163 ----------------------------------- ---------- -------------------- 13. Provisions Deferred contingent Restructuring and Total as consideration Onerous leases other costs 2017 Total re-presented 2016 $'000 $'000 $'000 $'000 $'000 At the beginning of the year 15,419 359 289 16,067 29,342 Release to income statement - - - - (1,022) Arising on acquisitions 65,939 - - 65,939 8,581 Utilised during the year (14,265) (52) (113) (14,430) (19,895) Unwinding of discount 380 - - 380 1,158 Measurement period adjustment 999 - - 999 - Translation adjustment 3,406 17 (3) 3,420 (2,097) --------------------- ------------------- --------------- -------------------- ----------- -------------------- At end of year 71,878 324 173 72,375 16,067 --------------------- ------------------- --------------- -------------------- ----------- -------------------- Non-current 58,136 269 65 58,470 6,084 Current 13,742 55 108 13,905 9,983 Total 71,878 324 173 72,375 16,067 --------------------- ------------------- --------------- -------------------- ----------- --------------------
14. Acquisition of subsidiary undertakings
On 21 October 2016, the Group acquired STEM Marketing Limited ("STEM"), a leading global provider of commercial, marketing and medical audits to pharmaceutical companies. The Group has agreed to pay the sellers an additional amount over the next three years if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.
On 3 April 2017, the Group acquired Steel Eagle LLC, a pharmaceutical packaging facility in Pennsylvania, USA.
On 1 July 2017, the Group acquired Vynamic LLC, a US-based healthcare industry management consulting firm. The Group has agreed to pay the sellers an additional amount over the next three years if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.
On 10 July 2017, the Group acquired Sellxpert GmbH, a German contract sales organisation. The Group has agreed to pay the sellers an additional amount over the next three years if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. On 10 July 2017, the Group also acquired a 50% stake in Sellxpert AG, a contract sales organisation based in Switzerland.
On 12 July 2017, the Group acquired Cambridge BioMarketing LLC, a US-based healthcare communications business. The Group has agreed to pay the sellers an additional amount over the next twelve months, if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.
On 13 September 2017, the Group acquired MicroMass Communications Inc ("MicroMass"), a US-based healthcare communications agency specialising in behavioural change. The Group has agreed to pay the sellers an additional amount over the next three years, if predefined financial thresholds are met. The Group has included contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition.
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of the above listed acquisitions. Any amendments to these acquisition fair values within the twelve-month timeframe from the date of acquisition will be disclosed in the relevant annual report as stipulated by IFRS 8 (revised 2008), Business Combinations.
In the prior financial year Pegasus Public Relations Limited, a healthcare communications company based in the UK, was acquired on 18 April 2016. The Group has revised its estimate of the acquisition date fair value of intangibles, deferred contingent consideration and trade and other receivables in respect of this acquisition. This has resulted in a corresponding increase in goodwill relative to the amount previously recorded. On the basis that this adjustment was not deemed to be material, it was accounted for in the current year as a measurement period adjustment.
The fair value of the assets and liabilities acquired in the year ended 30 September 2017 (excluding net cash acquired), determined on a provisional basis are set out below:
Measurement 2016 period 2017 Total STEM MicroMass Other Total adjustments Total As re-presented $'000 $'000 $'000 $'000 $'000 $'000 $'000 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Assets Non-current assets Property, plant and equipment 122 540 20,776 21,438 - 21,438 584 Intangible assets - computer software - - 77 77 - 77 - Intangible assets - other intangible assets 55,332 28,300 31,061 114,693 (1,005) 113,688 10,482 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Total non-current assets 55,454 28,840 51,914 136,208 (1,005) 135,203 11,066 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Current assets Inventories - - 800 800 - 800 - Trade and other receivables 9,459 6,320 18,814 34,593 (11) 34,582 6,215 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Total current assets 9,459 6,320 19,614 35,393 (11) 35,382 6,215 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Non-current liabilities Deferred income tax liabilities (9,406) (10,754) - (20,160) 171 (19,989) (1,782) -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Total non-current
liabilities (9,406) (10,754) - (20,160) 171 (19,989) (1,782) -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Current liabilities Trade and other payables (3,758) (3,362) (15,282) (22,402) - (22,402) (3,542) Current income tax liabilities 1,167 - (293) 874 - 874 (540) -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Total current liabilities (2,591) (3,362) (15,575) (21,528) - (21,528) (4,082) -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Identifiable net assets acquired 52,916 21,044 55,953 129,913 (845) 129,068 11,417 Intangible assets - goodwill 50,779 53,170 36,677 140,626 1,844 142,470 11,610 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Total consideration (enterprise value) 103,695 74,214 92,630 270,539 999 271,538 23,027 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Satisfied by: Cash 63,247 63,683 78,715 205,645 - 205,645 16,843 Net cash acquired (3,358) (1,120) (2,728) (7,206) - (7,206) (2,397) -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Net cash outflow 59,889 62,563 75,987 198,439 - 198,439 14,446 Equity Instruments (724,997 ordinary shares) 6,051 - - 6,051 - 6,051 - Deferred contingent acquisition consideration 37,755 11,651 16,533 65,939 999 66,938 8,581 Non-controlling interest - - 110 110 - 110 - -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------ Total consideration 103,695 74,214 92,630 270,539 999 271,538 23,027 -------------------------- ------- ------------ --------- --------- -------------- --------- ------------------
Goodwill is attributable to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. The significant factors giving rise to the goodwill include the value of the workforce and management teams within the businesses acquired and the enhancement of the competitive position of the Group in the marketplace and the strategic premium paid by UDG Healthcare plc to create the combined Group.
The intangible assets arising on the acquisitions are related to the trade names, customer relationships, technology and customer contracts.
The contractual assets are not materially different from the disclosed trade and other receivables.
The total transaction related costs for completed and aborted acquisitions amounts to $4,028,000 (2016: $2,214,000). These are presented separately in the Group Income Statement.
The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payment to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit thresholds must be met. On an undiscounted basis, the future payments for which the Group may be liable in respect of current year acquisitions ranges from nil to $64,420,000 at 30 September 2017 (2016: nil to $8,776,000).
The Group's results for the year ended 30 September 2017 and 30 September 2016 includes the following amounts in respect of the businesses acquired during the year:
2017 2016 Total Total $'000 $'000 Revenue 69,630 9,268 Gross profit 32,850 3,191 Selling and distribution expenses (21,263) (1,585) Other operating expenses* (8,365) (629) --------------------------------------- --------- -------- Operating profit 3,222 977 Net interest expense (1,120) 4 --------------------------------------- --------- -------- Profit before tax 2,102 981 Income tax (467) (197) --------------------------------------- --------- -------- Profit after tax 1,635 784 --------------------------------------- --------- --------
*Other operating expenses represent amortisation of intangible assets.
Had these acquisitions been effected on 1 October 2017, the combined Group would have recorded total revenues of $1,315,507,000 and profit after interest and tax for the financial year of $78,525,000.
15. Employee benefits
Employee Employee Employee benefit benefit benefit asset liability total $'000 $'000 $'000 Employee benefit asset/(liability) at 1 October 2016 (as re-presented) 13,939 (20,442) (6,503) Current service cost (2,387) - (2,387) Settlement gain - 2,728 2,728 Interest 276 (209) 67 Contributions paid - 4,218 4,218 Remeasurement gain 551 10,547 11,098 Translation adjustment - (4) (4) ------------------------------------------------------------------------ --------- ---------- --------- Employee benefit asset/(liability) at 30 September 2017 12,379 (3,162) 9,217 ------------------------------------------------------------------------ --------- ---------- --------- Employee Employee Employee benefit benefit benefit asset liability total $'000 $'000 $'000 Employee benefit asset/(liability) at 1 October 2015 (as re-presented) 14,639 (24,161) (9,522) Current service cost (2,186) (259) (2,445) Curtailment gain - 367 367 Settlement gain - 4,069 4,069 Interest 394 (470) (76) Contributions paid - 6,870 6,870 Remeasurement gain/(loss) 1,092 (9,324) (8,232) Disposal of liabilities - 2,240 2,240 Translation adjustment - 226 226 ------------------------------------------------------------------------ --------- ---------- --------- Employee benefit asset/(liability) at 30 September 2016 13,939 (20,442) (6,503) ------------------------------------------------------------------------ --------- ---------- ---------
As set out in the consolidated financial statements for the year ended 30 September 2016, the Group operates a number of defined benefit pension schemes which are funded by the payments of contribution to separately administered trust funds. The employee benefit asset relates to the United States pension scheme and the employee benefit liability relates to the Republic of Ireland (ROI) pension schemes. The Republic of Ireland schemes had a remeasurement gain in the current year which primarily relates to an increase in the discount rate. The change in the discount rate within the schemes is reflective of changes in bond yields during the year. The United States scheme had a remeasurement gain in the current year arising from a higher than expected return on plan assets. In the Republic of Ireland schemes, there is no longer a salary increase assumption due to the accrual of pension benefits ceasing from 1 December 2015.
During the current and prior year, a general offer was made to the members of the ROI schemes to transfer their accrued benefits from the schemes in exchange for a fixed monetary amount. Acceptance of the offer was at the discretion of individual members and resulted in a settlement gain of $2,728,000 (2016: $4,069,000, $2,641,000 of which related to discontinued operations). Related professional fees amount to $180,000 (2016: $261,000).
The principal assumptions and associated changes are as follows:
Republic of Ireland Schemes United States Scheme ---------------------------------------- ---------------------------------------- 2017 2016 2015 2017 2016 2015 Rate of increase in salaries n/a n/a 2.75% 2.75-4.00% 2.75-4.00% 2.75-4.00% Rate of increase in pensions 0-1.65% 0-1.75% 0-1.75% 0.00% 0.00% 0.00% Inflation rate 1.65% 1.50% 1.75% 2.75% 2.75% 2.75% Discount rate 2.05% 1.25% 2.70% 3.60% 3.30% 4.00%
16. Financial instruments
The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed consolidated balance sheet at 30 September 2017, are as follows:
Carrying Fair value value $'000 $'000 Financial assets Trade and other receivables 239,261 239,261 Derivative financial assets 3,752 3,752 Cash and cash equivalents 187,469 187,469 ------------------------------ ---- -------- 430,482 430,482 ------------------------------ ---- --------- -------- Financial liabilities Trade and other payables 70,739 70,739 Derivative financial liabilities 352 352 Interest-bearing loans 243,971 248,987 Finance leases 164 164 Deferred contingent consideration 71,878 71,878 387,104 392,120 ------------------------------- --- --------- --------
Trade and other receivables/payables
For receivables and payables, the carrying value less impairment provision is deemed to reflect fair value where appropriate.
Cash and cash equivalents
For cash and cash equivalents, the nominal amount is deemed to reflect fair value.
Interest-bearing loans and borrowings
The fair value of interest-bearing loans and borrowings is based on the fair value of the expected future principal and interest cash flows discounted at interest rates effective at the balance sheet date and adjusted for movements in credit spreads.
Finance lease liabilities
For finance lease liabilities, the fair value is the present value of future cash flows discounted at current market rates.
Valuation techniques and significant unobservable inputs
Fair value hierarchy of assets and liabilities measured at fair value
The Group has adopted the following fair value hierarchy in relation to its financial instruments that are carried in the balance sheet at fair value as at the year end:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices); and
-- Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table sets out the fair value of all financial assets and liabilities that are measured at fair value:
Level Level Level 1 2 3 Total $'000 $'000 $'000 $'000 Assets measured at fair value Designated as hedging instruments Cross currency interest rate swaps - 3,752 - 3,752 --------------------------- ------- ------- ------- ------- - 3,752 - 3,752 ------------------------ ------- ------- ------- ------- Liabilities measured at fair value At fair value through profit or loss Deferred contingent consideration - - 71,878 71,878 Designated as hedging instruments Cross currency interest rate swaps - 352 - 352 - 352 71,878 72,230 ------------------------ ------- ------- ------- -------
Summary of derivatives:
Amount of financial Related amounts Amount of Related amounts assets/liabilities not offset in financial not offset in as presented in the balance 2017 assets/liabilities the balance 2016 the balance sheet sheet Net as presented in sheet Net the balance sheet $000 $'000 $'000 $'000 $'000 $'000 Derivative financial assets 3,752 - 3,752 21,424 - 21,424 Derivative financial liabilities 352 - 352 - - - ------------------ -------------------- ----------------- ------- -------------------- ----------------- -------
All derivatives entered into by the Group are included in Level 2 of the fair value hierarchy and consist of cross currency interest rates swaps. The fair values of cross currency interest rate swaps are calculated as the present value of the estimated future cash flows based on the terms and maturity of each contract and using forward currency rates and market interest rates as applicable for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include, where appropriate, adjustments to take account of the credit risk of the Group entity and counterparty.
Deferred contingent consideration
Deferred contingent consideration is included in Level 3 of the fair value hierarchy. Details of the movement in the year are included in note 13. The fair value is determined considering the expected payment, discounted to present value using a risk adjusted discount rate. The expected payment is determined separately in respect of each individual earnout agreement taking into consideration the expected level of profitability of each acquisition. The provision for deferred contingent consideration is in respect of acquisitions completed during 2012, 2016 and 2017.
The significant unobservable inputs are:
-- forecasted average annual net revenue growth rate 13% (2016: 6%); -- forecast average EBIT growth rate 22% (2016: 10%); and -- risk adjusted discount rate 0.02% - 1.55% (2016: 6.5% - 8.2%).
Inter-relationship between significant unobservable inputs and fair value measurement:
The estimated fair value would increase/(decrease) if:
-- the annual net revenue growth rate was higher/(lower); -- the EBIT growth rate was higher/(lower); and -- the risk adjusted discount rate was lower/(higher).
For the fair value of deferred contingent consideration, a reasonably possible change to one of the significant unobservable inputs at 30 September 2017, holding the other inputs constant, would have the following effects:
Increase Decrease $'000 $000 ------------------------------- --------- --------- Effect of change in assumption on income statements Annual EBIT growth rate (1% movement) - - Annual net revenue growth rate (1% movement) - - Risk-adjusted discount rate (1% movement) 293 (212) ---------------------------------- --------- ---------
Financial ratios
Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.
2017 2016 Times Times Net (debt)/cash to annualised EBITDA (0.32) 1.05 Annualised EBITDA interest cover 16.3 10.6 ------------------------------------------ ------- -------
17. Dividends
The Board has proposed a final dividend of 9.72 $ cent per share which gives a total dividend of 13.30 $ cent for 2017. This dividend has not been provided for in the balance sheet at 30 September 2017 as there was no present obligation to pay the dividend at year end. During the financial year, the final dividend for 2016 (9.04 $ cent per share) and the interim dividend for 2017 (3.58 $ cent per share) were paid giving rise to a reduction in shareholders' funds of $31,279,000.
18. Foreign currency
The principal exchange rates used in translating sterling and dollar balance sheets and income statements were as follows:
2017 2016 ----------- ----------- $1=StgGBP $1=StgGBP Balance sheet (closing rate) 0.7469 0.7715 Income statement (average rate) 0.7891 0.7045 $1=EuroEUR $1=EuroEUR Balance sheet (closing rate) 0.8470 0.8960 Income statement (average rate) 0.9047 0.9002
19. Related parties .
The Group trades in the normal course of business with its joint venture undertakings. The aggregate value of these transactions is not material in the context of the Group's financial results.
Magir Limited, the Group's joint venture investment, has been classified as an asset held for sale at 30 September 2017. The Group has provided a guarantee to Magir's bankers for an amount of StgGBP9,500,000 and a loan, gross of interest, of StgGBP10,997,000.
IAS 24 Related Party Disclosures requires the disclosure of compensation paid to the Group's key management personnel. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. UDG Healthcare classifies directors, the Company Secretary and members of its senior executive team as key management personnel. The senior executive team is the body of senior executives that formulates business strategy along with the directors, follows through on the implementation of that strategy and directs and controls the activities of the Group on a day to day basis.
Key management personnel receive compensation in the form of short-term employee benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of $10,587,000 for the year ended 30 September 2017 (2016: $11,652,000).
20. Change in Presentation Currency
Following the disposal of the United Drug Supply Chain and Masta businesses in April 2016, the geographic profile of the Group's businesses has changed considerably and the vast majority of the Group's profits are now generated in currencies other than Euro. Half of the Group's profits are currently generated in US Dollars, the Group's US based businesses are demonstrating the greatest growth opportunities and future corporate development activity is likely to be US focused. Consequently, on 4 August 2016 the Group announced that from 1 October 2016, the financial results will be presented in US Dollars. The change in presentation currency has been applied retrospectively.
In re-presenting the Group Financial Statements for the year ended 30 September 2016, the reported information was converted to US Dollars from Euro using the following procedures:
-- Assets and liabilities were translated to US Dollars at the closing rates of exchange at each respective balance sheet date (30 September 2016: $1:EUR0.8960; 30 September 2015: $1:EUR0.8926).
-- Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions.
-- Income and expenses were translated to US Dollars at an average rate at each of the respective reporting periods. This has been deemed to be a reasonable approximation (30 September 2016: $1:EUR0.9002; 30 September 2015: $1:EUR0.8709).
-- Differences resulting from the retranslation were taken to reserves.
To assist shareholders during this change, the impacts on the 2016 results, closing balance sheets and the numerator for the earnings per share as originally reported are set out below:
Group Income Statement
As re-presented As restated and restated (note (note 3) 3) year ended year ended 30 September 30 September 2016 2016 EUR'000 $'000 Continuing operations Revenue 975,280 1,083,439 Cost of sales (691,181) (767,833) --------------------------------------- -------------- ---------------- Gross profit 284,099 315,606 Selling and distribution expenses (159,820) (177,543) Administration expenses (18,771) (20,854) Other operating expenses (16,395) (18,213) Transaction costs (1,993) (2,214) Share of joint ventures' profit after tax 718 798 --------------------------------------- -------------- ---------------- Operating profit 87,838 97,580 Finance income 4,781 5,311 Finance expense (17,417) (19,349) --------------------------------------- -------------- ---------------- Profit before tax from continuing operations 75,202 83,542 Income tax expense (13,888) (15,428) --------------------------------------- -------------- ---------------- Profit for the year from continuing operations 61,314 68,114 --------------------------------------- -------------- ---------------- Profit after tax for the year from discontinued operations 131,958 150,409 --------------------------------------- -------------- ---------------- Profit for the financial year 193,272 218,523 --------------------------------------- -------------- ---------------- Profit attributable to: Continuing operations 61,314 68,114 Discontinued operations 131,958 150,409 --------------------------------------- -------------- ---------------- 193,272 218,523 ------------------------------------ -------------- ---------------- Earnings per ordinary share: Basic - continuing operations 24.88c 27.64c Basic - discontinued operations 53.56c 61.04c --------------------------------------- -------------- ---------------- Basic 78.44c 88.68c --------------------------------------- -------------- ---------------- Diluted - continuing operations 24.78c 27.53c Diluted - discontinued operations 53.33c 60.79c --------------------------------------- -------------- ---------------- Diluted 78.11c 88.32c --------------------------------------- -------------- ----------------
Group Statement of Comprehensive Income
As originally As re-presented reported year ended year ended 30 September 30 September 2016 2016 EUR'000 $'000 Profit for the financial year 193,272 218,523 Other comprehensive income/(expense): Items that will not be reclassified to profit or loss: Remeasurement (loss)/gain on Group defined benefit schemes * Continuing operations (8,468) (9,409) * Discontinued operations 1,057 1,177 Deferred tax on Group defined benefit schemes * Continuing operations 539 599 * Discontinued operations (211) (232) ------------------------------------------------------------------- ---------------------- -------- ---------- (7,083) (7,865) ------------------------------------------------------------------- ---------------------- -------- ---------- Items that may be reclassified subsequently to profit or loss: Foreign currency translation adjustment * Continuing operations (45,373) (60,031) * Discontinued operations (7,109) (2,045) Reclassification on loss of control of subsidiary undertakings 4,640 5,283 Gain on hedge of net investment -
in foreign operations 2,262 Group cash flow hedges: * Effective portion of cash flow hedges - movement into reserve (4,936) (5,483) * Effective portion of cash flow hedges - movement out of reserve (806) (896) ---------- -------- Effective portion of cash flow hedges (5,742) (6,379) * Movement in deferred tax - movement into reserve 617 685 * Movement in deferred tax - movement out of reserve 101 113 ---------- -------- Net movement in deferred tax 718 798 ------------------------------------------------------------------- ---------------------- -------- ---------- (50,604) (62,374) ------------------------------------------------------------------- ---------------------- -------- ---------- Other comprehensive expense, net of tax (57,687) (70,239) ------------------------------------------------------------------- ---------------------- -------- ---------- Total comprehensive income, net of tax, attributable to equity holders of the parent 135,585 148,284 ------------------------------------------------------------------- ---------------------- -------- ---------- Total comprehensive income/(expense) attributable to: Continuing operations 5,250 (6,308) Discontinued operations 130,335 154,592 ------------------------------------------------------------------- ---------------------- -------- ---------- 135,585 148,284 ------------------------------------------------------------------- ---------------------- -------- ---------- Group Balance Sheet As at 30 September As at 30 September 2016 2015 As originally As originally reported As re-presented reported As re-presented EUR'000 $'000 EUR'000 $'000 ASSETS Non-current Property, plant and equipment 122,638 136,877 117,903 132,087 Goodwill 344,521 384,520 358,213 401,306 Intangible assets 97,054 108,322 101,693 113,927 Investment in joint ventures and associates 8,124 9,067 23,079 25,855 Derivative financial instruments 11,814 13,185 22,048 24,700 Deferred income tax assets 3,849 4,296 3,984 4,463 Employee benefits 12,489 13,939 13,067 14,639 --------------------------------- ------------- ---------------- -------------- ---------------- Total non-current assets 600,489 670,206 639,987 716,977 --------------------------------- ------------- ---------------- -------------- ---------------- Current Inventories 49,226 54,941 55,017 61,636 Trade and other receivables 209,472 233,791 205,248 229,939 Cash and cash equivalents 384,131 428,729 214,078 239,832 Current income tax assets 4,061 4,532 1,612 1,806 Derivative financial instruments 7,382 8,239 4,750 5,321 Assets held for sale - - 473,820 530,821 --------------------------------- ------------- ---------------- -------------- ---------------- Total current assets 654,272 730,232 954,525 1,069,355 --------------------------------- ------------- ---------------- -------------- ---------------- Total assets 1,254,761 1,400,438 1,594,512 1,786,332 --------------------------------- ------------- ---------------- -------------- ---------------- Equity Equity share capital 12,715 14,535 12,621 14,430 Share premium 156,084 187,355 152,164 183,000 Other reserves (41,295) (179,446) 10,077 (116,219) Retained earnings 595,449 784,432 433,912 600,793 --------------------------------- ------------- ---------------- -------------- ---------------- Total equity 722,953 806,876 608,774 682,004 --------------------------------- ------------- ---------------- -------------- ---------------- LIABILITIES Non-current Interest-bearing loans and borrowings 216,923 242,108 415,840 465,866 Provisions 5,451 6,084 7,508 8,411 Employee benefits 18,315 20,442 18,303 20,505 Deferred income tax liabilities 27,782 31,008 28,050 31,424 --------------------------------- ------------- ---------------- -------------- ---------------- Total non-current liabilities 268,471 299,642 469,701 526,206 --------------------------------- ------------- ---------------- -------------- ---------------- Current Interest-bearing loans and borrowings 58,133 64,882 20,811 23,315 Trade and other payables 183,190 204,468 191,758 214,831 Current income tax liabilities 13,070 14,587 4,452 4,988 Provisions 8,944 9,983 18,683 20,931 Liabilities held for sale - - 280,333 314,057 --------------------------------- ------------- ---------------- -------------- ---------------- Total current liabilities 263,337 293,920 516,037 578,122 --------------------------------- ------------- ---------------- -------------- ---------------- Total liabilities 531,808 593,562 985,738 1,104,328 --------------------------------- ------------- ---------------- -------------- ---------------- Total equity and liabilities 1,254,761 1,400,438 1,594,512 1,786,332 --------------------------------- ------------- ---------------- -------------- ----------------
21. Capital commitments
Capital expenditure authorised but not contracted for amounted to $18,900,000 (2016: $29,668,000) at the balance sheet date. This primarily relates to the Group's UK clinical facility move and the Group's investment in Future Fit IT initiatives.
22. Events after the balance sheet date
There have been no significant events after the balance sheet date which require disclosure.
23. Going concern
The directors believe that the Company and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the preliminary announcement.
24. Board approval
This announcement was approved by the Board of Directors of UDG Healthcare plc on 27 November 2017.
Additional Information
Key performance indicators and non-IFRS performance measures
The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with IFRS financial information, provides stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration.
None of the non-IFRS measurements should be considered as an alternative to financial measures derived in accordance with IFRS. The non-IFRS measurements can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS.
The principal non-IFRS measurements used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the Financial Statements, are as follows:
Net revenue (continuing)
Definition
This comprises of gross revenue as reported in the Group Income Statement, adjusted for revenue associated with pass-through costs for which the Group does not earn a margin.
2017 2016 Calculation $'000 $'000 ------------------------- ----------------- --------- --------- Revenue (continuing) Income Statement 1,219,755 1,083,439 Pass - through revenue (191,269) (163,490) -------------------------------------------- --------- --------- Net revenue (continuing) 1,028,486 919,949 -------------------------------------------- --------- ---------
Adjusted operating profit (continuing)
Definition
This comprises of operating profit as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).
2017 2016 Calculation $'000 $'000 -------------------------------- ----------------- ------- ------- Operating profit (continuing) Income Statement 103,186 97,580 Transaction costs (continuing) Income Statement 4,028 2,214 Amortisation of acquired intangible assets (continuing) Note 4 22,066 15,977 -------------------------------- ----------------- ------- ------- Adjusted operating profit (continuing) 129,280 115,771 --------------------------------------------------- ------- -------
Adjusted profit before tax (continuing)
Definition
This comprises profit before tax as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).
2017 2016 Calculation $'000 $'000 ------------------------------------------- ----------------- ------- ------- Profit before tax (continuing) Income Statement 92,834 83,542 Transaction costs (continuing) Income Statement 4,028 2,214 Amortisation of acquired intangible assets (continuing) Note 4 22,066 15,977 Adjusted profit before tax (continuing) 118,928 101,733 -------------------------------------------------------------- ------- -------
Adjusted operating margin (continuing)
Definition
Measures the adjusted operating profit as a percentage of revenue.
2017 2016 Calculation $'000 $'000 --------------------------------------- ------------------ --------- --------- Adjusted operating profit (continuing) Per above 129,280 115,771 Revenue (continuing) Income Statement 1,219,755 1,083,439 --------------------------------------- ------------------ --------- Adjusted operating margin (continuing) 10.6% 10.7%
Adjusted net operating margin (continuing)
Definition
Measures the adjusted operating profit as a percentage of net revenue.
2017 2016 Calculation $'000 $'000 --------------------------------------- ---------- --------- ------- Adjusted operating profit (continuing) Per above 129,280 115,771 Net revenue (continuing) Per above 1,028,486 919,949 --------------------------------------- ---------- --------- Net operating margin (continuing) 12.6% 12.6% ---------
Adjusted diluted earnings per share
Definition
The Group defines adjusted earnings per share as basic earnings per share adjusted for the impact of amortisation of acquired intangible assets, transaction costs and exceptional items (if any).
2017 2016 Calculation $'000 $'000 ------ Adjusted earnings per share - US cent (continuing) Note 8 37.12 31.79 Adjusted earnings per share - US cent (discontinued) Note 8 - 7.47 ------ Adjusted earnings per share 37.12 39.26 ------
Effective tax rate (continuing)
Definition
The Group continuing effective tax rate expresses the income tax expense adjusted for the tax impact of exceptional items, transaction costs and the amortisation of acquired intangible assets as a percentage of adjusted profit before tax for continuing operations.
2017 2016 Calculation $'000 $'000 ----------------- ------- Tax charge (continuing) Income Statement 20,976 15,428 Tax relief with respect to transaction costs (continuing) 370 91 Deferred tax credit with respect to acquired intangible amortisation (continuing) 5,070 7,564 Income tax expense before exceptional, transaction costs and deferred tax attaching to amortisation of acquired intangible assets 26,416 23,083 Adjusted profit before tax (continuing) Per above 118,928 101,733 Effective tax rate (continuing) 22.2% 22.7%
Annualised EBITDA
Definition
Annualised EBITDA is continuing and discontinued earnings before net interest, tax, depreciation, amortisation of intangible assets, exceptional items for the previous twelve months adjusted for the share of joint venture profits, dividends received from joint ventures, profit/(loss) on disposal of property, plant and equipment, impairment of intangible assets, the annualisation of the EBITDA of companies acquired during the year and the EBITDA of completed disposals.
2017 2016 Calculation $'000 $'000 -------------------------------------------------------- ------- -------- Operating profit (continuing) Income Statement 103,186 97,580 Operating profit (discontinued) Note 7 - 19,338 Depreciation (continuing) Cash Flow Statement 21,221 20,032 Amortisation of computer software (continuing) Note 10 3,384 2,236 Amortisation of acquired intangible assets (continuing) Note 4 22,066 15,977 Joint venture profit share (continuing) Income Statement (667) (798) Joint venture profit share (discontinued) Note 7 - (1,659) Loss on disposal of property, plant and equipment Cash Flow Statement 55 59 EBITDA of completed disposals Note 7 - (17,679) Annualised EBITDA of acquisitions(1) 14,827 1,735 ------------------------------------------------------------------------------ ------- -------- Annualised EBITDA 164,072 136,821 ------- --------
(1) Includes EBITDA for acquisitions which were not part of the Group for the full financial year.
Financial ratios
Definition
The net (debt)/cash to EBITDA and EBITDA interest cover ratios disclosed are calculated using annualised EBITDA and adjusted net finance expense (net finance expense excluding interest on pension scheme obligations and the unwinding of discount on provisions, see note 6). Net (debt)/cash represents the net total of current and non-current borrowings, current and non-current derivative financial instruments and cash and cash equivalents as presented in the Group Balance Sheet and as calculated in note 12.
Return on capital employed (ROCE)
Definition
ROCE is the continuing adjusted operating profit expressed as a percentage of the Group's net assets employed. Net assets employed is the average of the opening and closing net assets in the year excluding net debt/(cash) adjusted for the historical amortisation of acquired intangible assets and restructuring charges.
2017 2016 Calculation $'000 $'000 --------- Balance Net assets Sheet 880,656 806,876 Net debt/(cash) Note 12 53,266 (143,163) Assets before net debt/(cash) 933,922 663,713 Historical intangible amortisation 176,997 146,467 Historical restructuring costs 47,494 45,144 Total capital employed 1,158,413 855,324 Average total capital employed 1,006,869 849,580 Adjusted operating profit (continuing) Per above 129,280 115,771 Return on capital employed 12.8% 13.6%
Measurements removed from the additional information section that are shown elsewhere in the preliminary announcement are as follows:
-- Adjusted operating profit (discontinued) - this measurement is shown in note 8 -- Net interest - this measurement is shown in note 6 -- EBITDA Interest cover - this measurement is shown in note 16 -- Net (debt)/cash - this measurement is shown in note 12 -- Net (debt)/cash to EBITDA - this measurement is shown in note 16
A number of measurements have been removed from the additional information section. The Group believes these are not necessary to provide stakeholders with a more meaningful understanding of the underlying financial operating performance of the Group and its divisions as other performance measures are deemed more appropriate. Measurements removed are as follows:
-- Adjusted profit before tax (discontinued) -- EBITDA (continuing) -- EBITDA (discontinued) -- Working capital (continuing)
This information is provided by RNS
The company news service from the London Stock Exchange
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November 28, 2017 02:00 ET (07:00 GMT)
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