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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Udg Healthcare Public Limited Company | LSE:UDG | London | Ordinary Share | IE0033024807 | ORD EUR0.05 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,079.00 | 1,078.00 | 1,079.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMUDG
RNS Number : 2660N
UDG Healthcare Public Limited Co.
19 May 2020
UDG Healthcare plc
Interim Report 2020
19 May 2020: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its results for the six months to 31 March 2020, in which the Group delivered a strong first half performance and an update on the impact of COVID-19.
Key updates
-- Strong H1 FY20 performance well ahead of prior year:
o Adjusted diluted earnings per share (EPS) increased by 16% (16% on a constant currency basis)
o Underlying* net revenue growth of 4%. Total net revenue growth of 10% on a constant currency basis
o Underlying* adjusted operating profit growth of 10%. Total adjusted operating profit increased by 24% on a constant currency basis, reflecting continued growth in Ashfield and Sharp
o Ashfield's operating profit increased by 24% on a constant currency basis, driven by good underlying growth in Communications & Advisory, and the benefit of 2019 acquisitions
o Sharp performed very strongly, with operating profit increasing by 24% on a constant currency basis driven by strong underlying growth across the division
o Adjusted net operating margin increased from 12.0% to 13.6%
-- Robust balance sheet with net debt to EBITDA of 0.3x** and a continued strong cash flow conversion performance
-- In May, Sharp completed the acquisition of a packaging facility in the U.S., adding incremental capacity to the U.S. commercial packaging business
-- COVID-19 impact:
o The health and wellbeing of our people and serving our clients remains the Group's priority
o H2 FY20 performance expected to be impacted by COVID-19
o Ongoing mitigation plans being implemented across the Group
o As previously announced in the April 2020 trading update, FY20 interim dividend suspended and FY20 financial guidance withdrawn due to current uncertainty
*underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity
**calculated in line with financial covenant requirements
Chief Executive's comment
Chief Executive Officer, Brendan McAtamney commented:
"The Group's priority remains on protecting the health and wellbeing of our people and serving our clients during this challenging time. I am immensely proud of the continued hard work and resilience of our people and want to reiterate my continued appreciation for their dedication and commitment.
As announced in our April 2020 trading update, we delivered a strong first half performance, well ahead of the prior year, driven by underlying growth and acquisitions in Ashfield, and strong demand in our Sharp business. While we expect to see an impact from COVID-19 in the second half, we are implementing plans across the Group to mitigate this.
UDG is a strong and diversified business, underpinned by excellent long-term market fundamentals and a robust balance sheet and cash flow position. While uncertainty remains, I am confident the decisive actions taken now will ensure we remain well positioned through the crisis and beyond."
Financial Results - six months to 31 March 2020
Hot Features
Premium
IFRS based
Increase/
31 March 31 March
2020 2019 (decrease)
$'m $'m %
Revenue 693.6 656.6 6
Operating profit 68.5 34.1 n/m
Profit before tax 62.3 30.3 n/m
Diluted earnings per share
("EPS") (cent) 22.03 9.27 n/m
Dividend per share (cent) - 4.46 (100)
----------------------------------------------- ----------- --------- ------------- -----------
31 March 31 March 30 September
2020 2019 2019
Net debt ($'m) 58.2 56.8 80.5
Net debt ($'m) including IFRS
16 lease liabilities 157.1 n/a n/a
Net debt/annualised EBITDA
(times) 0.3 0.3 0.4
----------------------------------------------- ----------- --------- ------------- -----------
Constant
31 March 31 March currency
2020 2019 Increase increase
Alternative performance measures
(1) $'m $'m % %
Revenue 693.6 656.6 6 6
Net Revenue 596.2 546.2 9 10
Adjusted operating profit 81.3 65.6 24 24
Adjusted profit before tax 75.0 61.8 21 21
Adjusted diluted earnings
per share ("EPS") (cent) 23.64 20.32 16 16
----------------------------------------------- ----------- --------- ------------- -----------
COVID-19 update and outlook
Protecting the wellbeing of our people
Since the start of the COVID-19 outbreak, the Group's priority has been the health and wellbeing of our people and their families. A global response team established in the initial stages of the outbreak, made up of representatives from across the Group, continues to convene on a regular basis to review existing measures to protect colleagues and manage these as required.
Across all of our businesses, we have put in place additional health and safety measures to protect our people. At our Sharp sites, these measures include providing incremental personal protective equipment, additional cleaning and hygiene services, and adapting shift patterns to enable required social distancing. In Ashfield the vast majority of our employees are working remotely.
We have also developed and launched a number of wellbeing initiatives and resources, which are available to all employees across the Group. Launched during wellbeing week, our employee microsite, "Wellspace", contains free webinars, useful resources, activities and classes to support physical and mental wellbeing.
Continuing to deliver for our clients
Despite the impact of COVID-19 on activity and operations, our people have shown incredible commitment and dedication in light of the unprecedented challenges presented by this outbreak. As a result, the Group has continued to deliver for clients to the extent possible during this challenging time, aided by our significant investments in technology in recent years.
We also continue to use our expertise to support our clients in their efforts to find a treatment for COVID-19, including packaging, distribution and medical information services on several clinical trials related to COVID-19. Our teams in Ashfield have adapted rapidly to ensure we can deliver services such as field-based training, clinical educators, patient support programs and live events virtually to our clients.
Supporting the communities we operate in
The Group has a long record of supporting local communities through hands-on projects and charitable fundraising. Over the last few months we have been supporting the communities we operate in through foodbank donations, charitable fundraising, a donation to #fuellingthefrontline, an initiative in Ireland to provide essential and nutritious meals to Frontline Heroes fighting COVID-19, as well as donating personal protective equipment to hospitals and manufacturing face shields for front line workers from surplus materials.
Impact on our operations
Within Ashfield, as a dynamic and technology-enabled business, we continue to serve our clients remotely where possible, although we have seen some project deferrals and cancellations. In-field based activities in Ashfield (particularly in our Meetings and Events business, field-based representatives, clinical educator business and audit services in STEM) are experiencing more significant disruption and reduced activity.
In Sharp, where we package critical and in some cases life-saving medicines for patients, the business has been categorised as essential and therefore continues to operate. Demand within Sharp remains very robust. Temporary disruption to production schedules and capacity resulting from the additional health and safety measures, along with workforce availability, is expected to reduce our efficiency and revenue. Actions to mitigate these impacts are being implemented, resulting in workforce availability sequentially improving, and the social distancing measures being partially offset by incremental automation.
Cost management
The Group is actively adopting tighter cost control measures to mitigate the potential negative impacts from COVID-19. These measures have included: the reduction of appropriate variable costs; tight control of discretionary expenditure; a recruitment freeze; reducing freelancer expenditure; and a temporary reduction in labour, including reduced working hours and furloughing of employees.
The Board and Senior Executive Team have voluntarily agreed to take a 20% reduction in their respective fees and base salary for at least the next three months.
Balance sheet, liquidity and dividend
The Group has a robust financial position with a strong balance sheet and liquidity profile, and a net debt to EBITDA ratio of 0.3x at 31 March 2020 (as defined by our debt agreements) which compares to the Group's banking covenant of 3.5x net debt to EBITDA. The Group also has access to committed undrawn debt facilities of $230m.
Having regard for all stakeholders' interests and the wider societal challenges, the Board took the decision at the time of the April 2020 trading update to suspend an interim dividend for H1 FY20. The Board has committed to keeping this decision under review during the financial year as the effects of the COVID-19 outbreak become clearer.
Group outlook
As communicated at the time of our April 2020 trading update, the Group expects lower activity levels than previously anticipated during the second half of FY20. As a result, the Group withdrew its constant currency EPS guidance for FY20 in light of the ongoing uncertainty and near-term challenges presented by the COVID-19 outbreak.
During FY19 and the first half of FY20, the Group delivered a strong underlying growth performance, supplemented by the benefits of recent acquisition activity. The Group's strong and diversified business, accompanied by excellent market fundamentals and its robust financial position, leaves it well placed to deliver renewed strong growth over the medium term.
Upcoming financial results
The Group will issue its Third Quarter Trading Update on Wednesday, 5(th) August 2020.
Notes:
(1) Alternative performance measures ("APMs) are 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. APMs are presented to provide readers with additional financial information that is regularly reviewed by management. 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. APMs should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS. See "Additional Information" on page 36 for definitions and reconciliations to the closest respective equivalent GAAP measure.
Review of Operations
for the six months to 31 March 2020
Ashfield
Six months to 31 March 2020 2019 Actual Underlying
Growth
$'m $'m Growth (2)
------------------------------- ------ ------ ------- -----------
Revenue
Communications & Advisory 220.4 174.6 26% 6%
Commercial & Clinical 287.5 316.4 (9%) (7%)
Total 507.9 491.0 3% (3%)
Net revenue (1)
Communications & Advisory 201.0 154.5 30% 7%
Commercial & Clinical 209.4 226.1 (7%) (5%)
Total 410.4 380.6 8% 0%
Adjusted operating profit
(3)
Communications & Advisory 41.1 30.0 37% 8%
Commercial & Clinical 17.5 17.4 1% 0%
Total 58.6 47.4 24% 5%
Adjusted operating margin
(3)
Operating margin (on revenue) 11.5% 9.7%
Net operating margin (on net
revenue) 14.3% 12.5%
-------------------------------- ------ ------ ------- -----------
(1) Net revenue represents reported revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin. There are no pass-through revenues in Sharp.
(2) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
(3) Adjusted operating profit is operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items.
Ashfield delivered a strong performance in H1 FY20, driven by good underlying growth and the benefit of acquisitions made in 2019 within Ashfield Communications and Advisory.
Ashfield generated net revenue(1) of $410.4 million and adjusted operating profit(3) of $58.6 million, 8% and 24% respectively ahead of the same period last year. Adjusting for the impact of currency translation movements and the contribution from acquisitions, underlying(2) net revenue growth was flat and underlying operating profit increased by 5%. Ashfield's net operating margin improved from 12.5% to 14.3%.
Ashfield Communications & Advisory, which now represents over 70% of Ashfield's operating profits, performed strongly in the period. Net revenue increased by 30% and operating profit increased by 37%, including the benefit of the FY19 acquisitions of Putnam and Incisive Health. On an underlying basis, net revenue increased by 7% and operating profit increased by 8%.
Ashfield Commercial & Clinical performed in line with previously communicated expectations. Net revenue declined compared to the same period last year, including the disposal of Ashfield's pharmacovigilance business. Operating profit growth in the period was flat, reflecting the benefits of 2019 restructuring completed primarily within the European business.
As demonstrated during H1 FY20, Ashfield continues to perform strongly, delivering on its strategy to diversify and expand its service offering, demonstrate increasing collaboration across the division and execute strategic acquisitions to complement existing business capabilities. Ashfield remains well positioned for continued underlying growth in line with the Group's medium-term outlook, although we anticipate some parts of the business will be impacted in the near term by the outbreak of COVID-19 as detailed above.
Sharp
Six months to 31 March 2020 2019 Actual Underlying
Growth
$'m $'m Growth (1)
--------------------------- ------ ------ ------- -----------
Revenue 185.8 165.6 12% 13%
Adjusted operating profit
(2) 22.7 18.2 25% 24%
Adjusted operating margin
% (2) 12.2% 11.0%
---------------------------- ------ ------ ------- -----------
(1) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
(2) Adjusted operating profit is operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items.
Sharp delivered a very strong performance during the period, generating revenue of $185.8 million and adjusted operating profit (2) of $22.7 million, 12% and 25% respectively ahead of the same period last year. Sharp's operating margin improved from 11.0% to 12.2%.
Sharp's very strong performance was driven by increasing demand for the packaging of serialised specialty and biotech products, which was a trend in FY19 and continued in H1 FY20. Sharp is well positioned to serve this continued increase in demand following additional operating investments made in people and capacity during 2019. Demand for Sharp's traditional packaging services also continues to remain strong.
In May 2020, Sharp completed the acquisition of a packaging facility for approximately $5 million close to its existing campus in Allentown, Pennsylvania, which will provide incremental capacity to the U.S. commercial packaging business. This investment positions Sharp favourably to meet the increasing demand from new and existing clients across all packaging formats.
Sharp continues to experience strong demand, with a robust pipeline of new business. Due to the implementation of additional health and safety measures, along with workforce availability, as a result of the COVID-19 outbreak, the business is experiencing temporary disruption to production schedules and capacity which is expected to reduce efficiency and output in the near term. Actions to mitigate these impacts are being implemented. As a consequence, workforce availability is sequentially improving, while the impact of social distancing measures is being addressed through increased automation.
Beyond the impacts of COVID-19, Sharp's strong pipeline of business, its robust market position and recently added additional capacity, leave it well placed to meet client demand and deliver continued strong growth in line with the Group's medium-term outlook.
Analyst presentation
In line with government guidance on social distancing, the company has decided not to proceed with a physical results presentation. Instead management will host a live audio webcast and conference call at 8.30am BST today, Tuesday, 19 May 2020. If you wish to dial-in the details are below:
Conference call registration link: https://secure.emincote.com/client/udghealthcare/udg003/vip_connect
Webcast registration link: https://secure.emincote.com/client/udghealthcare/udg003
It is suggested participants dial-in at least 15 minutes prior to the start time in order to ensure a timely start to the briefing. Please note that questions will only be taken from the conference call.
A replay of the audio webcast can be accessed after the presentation via the same webcast link above.
For further information, please contact:
Investors and Analysts:
Keith Byrne
SVP, IR, Strategy & Corporate Communications
UDG Healthcare plc
Tel: + 353-1-468-9000
Business / Financial media:
Lisa Kavanagh / Jack Hickey
Powerscourt
Tel: + 44-207-250-1446
About UDG Healthcare plc
UDG Healthcare plc (LON: UDG) is a leading international partner of choice delivering advisory, communication, commercial, clinical and packaging services to the healthcare industry, employing 9,000 people with operations in 26 countries and delivering services in over 50 countries.
UDG Healthcare plc operates across two divisions: Ashfield and Sharp.
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.
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. In particular, any statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated cost savings and synergies and the execution of the Group's strategy, are 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, because they relate to events and depend upon circumstances that will occur in the future. 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, health, security and business factors, as well as international, national and local conditions which 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. Any forward looking statements speak only as of the date they are made and, 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. Nothing in this document should be construed as a profit forecast. UDG Healthcare plc and its directors accept no liability to third parties.
Finance Review
for the six months to 31 March 2020
IFRS based
Increase/
31 March 31 March
2020 2019 (decrease)
$'m $'m %
Revenue 693.6 656.6 6
Operating profit 68.5 34.1 n/m
Profit before tax 62.3 30.3 n/m
Diluted earnings per share
("EPS") (cent) 22.03 9.27 n/m
Dividend per share (cent) - 4.46 (100)
------------------------------------- --------- --------- -------------
Alternative performance measures
(1)
31 March 31 March
2020 2019
Constant
currency
$'m $'m Increase increase
Revenue 693.6 656.6 6 6
Net Revenue 596.2 546.2 9 10
Adjusted operating profit 81.3 65.6 24 24
Adjusted profit before tax 75.0 61.8 21 21
Adjusted diluted earnings
per share ("EPS") (cent) 23.64 20.32 16 16
------------------------------------- --------- --------- ------------- -----------
Revenue
Revenue of $693.6 million for the period is 6% ahead of 2019 (6% on a constant currency basis). Ashfield revenue increased by 3% and Sharp revenue increased by 12%. Group underlying net revenue increased by 4%, excluding the impact of foreign exchange, acquisitions and disposals.
Adjusted operating profit
Adjusted operating profit of $81.3 million is 24% ahead of 2019 (24% on a constant currency basis).
Adjusted net operating margin
The adjusted net operating margin for the businesses for the period is 13.6%, ahead of 12.0% in 2019.
Adjusted profit before tax
Net interest costs for the period of $6.3 million are higher than 2019, primarily due to the Group's adoption of IFRS 16 Leases on 1 October 2019. Interest income was also impacted by lower interest income on US cash deposits. This delivered an adjusted profit before tax of $75.0 million.
Taxation
The effective taxation rate has increased from 17.8% in 2019 to 21.0% in 2020, due to an increase in the proportion of profit earned in the U.S.
Adjusted diluted earnings per share
Adjusted diluted earnings per share ('EPS') is 16% ahead (16% on a constant currency basis) of 2019 at 23.64 $ cent.
Exceptional items
The Group incurred an exceptional gain of $9.6 million after tax in the period.
During the period, Ashfield disposed of Ashfield Pharmacovigilance, a U.S. based subsidiary that provides safety and risk management services supporting healthcare organisations. The business was not considered core to Ashfield's operations and the disposal resulted in a gain of $5.3 million. The related tax charge was $0.1 million.
In the measurement of the Group's current tax liabilities, there are transactions and calculations, for which the ultimate tax determination can be both complex and uncertain. During the period, the Group recognised a credit of $4.4 million on the remeasurement of current tax liabilities as a consequence of the resolution of a historic uncertain tax position.
Foreign exchange
The Group operates in 26 countries, with its primary foreign exchange exposure being the translation of local income statements and balance sheets into U.S. dollar for Group reporting purposes. The retranslation of non-U.S. dollar profits to U.S. dollar has not resulted in a change to the reported adjusted diluted EPS growth of 16%.
The average H1 FY20 exchange rates were $1: GBP0.7797 and $1: EUR0.9051 (2019: $1: GBP0.7725 and $1: EUR0.8783).
(1) See "Additional Information" on page 36 for more information and reconciliations to the closest respective equivalent GAAP measures.
Cash flow
The table displayed below includes information for the periods ended 31 March 2020 and 2019.
2020 2019
$'000 $'000
-------------------------------------------------------------- --------- ---------
Net cash inflow from operating activities 97,526 63,538
Net cash outflow from investing activities (43,182) (43,739)
Net cash outflow from financing activities (38,762) (28,248)
-------------------------------------------------------------- --------- ---------
Net change in cash and cash equivalents 15,582 (8,449)
Effect of exchange rate changes on cash and cash equivalents 313 (2,435)
Cash and cash equivalents at beginning of period 135,228 180,099
Cash and cash equivalents end of period 151,123 169,215
-------------------------------------------------------------- --------- ---------
Net cash inflow from operating activities
The net cash inflow from operating activities is $97.5 million (2019: $63.5 million).
2020 2019
$'000 $'000
------------------------------------------- --------- --------
Adjusted EBITDA 107,099 83,284
Interest paid (5,930) (4,158)
Income taxes paid (17,348) (9,595)
Working capital decrease 20,298 2,075
Other cash outflows (6,593) (8,068)
------------------------------------------- --------- --------
Net cash inflow from operating activities 97,526 63,538
------------------------------------------- --------- --------
Adjusted EBITDA in the first half of 2020 benefited from the inclusion of $8.9 million due to the adoption of IFRS 16 Leases on 1 October 2019. Income taxes paid increased mainly due to changes in payment dates under UK legislation, along with increased profitability. Working capital decreased by $20.3 million (2019: $2.1 million decrease). The decrease in working capital is principally due to the timing of client prepayments and strong cash collection in the period. Other cash outflows of $6.6 million relates to transaction costs paid of $0.9 million and exceptional items outflow of $5.7 million relating to the 2019 exceptional charge (2019 cash flows of $8.1 million relate to transaction costs paid of $0.7 million and exceptional items outflow of $7.4 million).
Net cash outflow from investing activities
Net cash outflow from investing activities is $43.2 million, compared to $43.7 million in 2019. During the period, $19.3 million was invested in property, plant and equipment, primarily for Sharp's U.S. operations. Acquisition activity in the period resulted in net cash payments of $21.8 million, and deferred and contingent consideration outflows of $8.9 million. The Group received net cash of $9.9 million following the disposal of Ashfield Pharmacovigilance in the period.
Net cash outflow from financing activities
Net cash outflow from financing activities increased by $10.5 million to $38.8 million in the period, principally due to the Group's adoption of IFRS 16 Leases during the period. The impact of adoption includes $7.9 million of capital lease payments within financing activities.
Balance sheet
Net debt at the end of the period is $58.2 million ($151.1 million cash and $209.3 million debt). Including lease liabilities, net debt at the end of the period is $157.1 million. The net debt to annualised EBITDA ratio is 0.3 times debt (2019: 0.3 times) and net interest is covered 27.2 times (2019: 24.1 times) by annualised EBITDA. Financial covenants in our principal debt facilities exclude lease liabilities under IFRS 16 and are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.
Return on capital employed
The Group's ROCE is 14.1% up from 12.2% at 31 March 2019. Details of this calculation are on page 38.
Dividends
During the period, the final dividend for 2019 (12.34 $ cent per share) was paid, giving rise to a reduction in shareholders' funds of $30,887,000. Having regard for all stakeholders' interests and the wider societal challenges, the Board have taken the decision to suspend an interim dividend.
Principal risks and uncertainties
The Transparency (Directive 2004/109/EC) Regulations 2007 require the disclosure of the principal risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year.
The Group operates within a highly regulated environment and the expectations of our key stakeholders, which include our clients and regulators, are very high. Our services include, for example, communicating to healthcare professionals, pharmaceutical packaging and the distribution of pharmaceutical products for use in clinical trials. We focus on making sure that we deliver these services correctly and in a compliant way. However, failure to do so could result in adverse consequences for patients and our clients, so the risks that we face in delivering our services are potentially significant.
The Group's ability to avoid or mitigate these risks is underpinned by detailed risk registers maintained by each of the Group's divisions and business units. These risk registers identify the risks, as well as the plans for addressing them, and the consolidated Group risk register is reviewed by the executive directors on a regular basis. The consolidated risk register is also reviewed by the Risk, Investment and Financing Committee and the Chairman of that committee reports to the Board on the outcome of each review.
Information on the Group's approach to the COVID-19 pandemic is found in the "COVID-19 update and outlook" section above. The Group is closely monitoring the spread of COVID-19 and its known and potential impacts on our divisions and business units. Given the continued impact of COVID-19 within jurisdictions where the Group operates, 'Pandemic risk' has also been identified as a principal risk and uncertainty.
The principal risks and uncertainties identified by the risk management process as facing the Group are detailed below:
Strategic
----------------------- -------------------------------------- -------------------------------------------
Risk Impact Mitigation
----------------------- -------------------------------------- -------------------------------------------
Value generation Acquisitive growth remains All potential acquisitions
from acquisitions a core element of the Group's are assessed and evaluated
strategy. A failure to execute to ensure that the Group's
and properly integrate acquisitions defined strategic and financial
may impact the Group's projected criteria are met. A discrete
revenue growth and its ability integration process and post
to capitalise on the synergies integration review is developed
they bring and/or to maintain for each acquisition. This
and develop the associated process is supported by experienced
talent pool. management with a view to achieving
identified benefits, cultivating
talent and minimising general
and specific integration risks.
----------------------- -------------------------------------- -------------------------------------------
Innovation The continued success of Innovation and insight is at
and insight the Group has been dependent the fore of all business and
upon the development and acquisition strategies set
delivery of innovative solutions down by the Senior Executive
to our clients. Examples Team (SET). At a divisional
include serialised packaging level, each management team
and multichannel contract has a responsibility to identify
sales and contact centre current and projected client
solutions. An inability to and market demands for new
predict client and market service offerings and market
trends and develop and deliver changes and have designated
such innovation would be roles within their business
a risk to the maintenance units tasked to deliver on
of our market leading positions this.
in the various sectors in
which we operate.
----------------------- -------------------------------------- -------------------------------------------
Client diversification As the Group's activities In individual business units
consolidate and further acquisitions where there is a high dependence
are completed, the Group's on a small number of key clients,
client base may become more the threats and opportunities
concentrated, making the are reviewed by divisional
Group more susceptible to management at each business
competitive, client merger review. The impact that any
or procurement led threats. potential acquisition may have
on client concentration is
considered as part of the acquisition
assessment process.
----------------------- -------------------------------------- -------------------------------------------
Client outsourcing The Group's activities may In order to maintain or develop
strategy be impacted by changes to a preferred vendor relationship
pharma company outsourcing with our target clients, acquisitions
strategy, such as pharma can be used to fill any key
companies reducing their gaps in client coverage or
roster of preferred vendors, service offering. The key is
or the wholesale outsourcing to maintain strong client relationships
to holding companies that and to keep abreast of potential
meet all of their service changes in their business strategies.
requirements. We have developed an agile
Business Development strategy
to maximise our value to clients.
----------------------- -------------------------------------- -------------------------------------------
Talent management The success of the Group Talent requirements of the
is built upon effective management Group are monitored to ensure
teams that consistently deliver businesses meet prevailing
superior performance. If and anticipated requirements
the Group cannot attract, in term of skills, competencies
retain and develop suitably and performance. There is strong
qualified, experienced and focus on key talent management
motivated employees, this practices including leadership
could have an impact on business and management development,
performance. succession planning and performance
management. A formal talent
review process is implemented
globally and local talent reviews
are conducted and linked to
the global process.
----------------------- -------------------------------------- -------------------------------------------
Risk Impact Mitigation
----------------------- -------------------------------------- -------------------------------------------
Economic, Political, The global macroeconomic, The Group continues to review
Legislative, political, regulatory, legislative its portfolio of investments
Regulatory and taxation environment through the annual strategic
and Tax may have a detrimental impact review process and through
on our client base, the markets constant challenge at a SET
in which they operate, the and Board level. Acquisitions
services we can offer them and new service offerings are
and our operations in those sought which improve the balance
markets. Such detrimental of our investments and give
impacts could result from greater exposure to innovative
Brexit, for example, or trade and growing market segments.
tensions which remain elevated As previously noted, reduced
in many parts of the world. exposure to the U.K., and other
steps taken by the Group, significantly
mitigate the potential impact
of Brexit to the Group as a
whole.
----------------------- -------------------------------------- -------------------------------------------
Operational
----------------------- -------------------------------------- -------------------------------------------
Pandemic risk The COVID-19 outbreak is The diversified nature of the
an unprecedented global event Group's businesses, our robust
whose impacts and duration balance sheet, and the market
are not yet fully known. fundamentals that underpin
The Group expects COVID-19 our businesses inherently provide
to impact operations and mitigation to the Group from
performance, and to result pandemic risk. The activation
in continued uncertainty of Group business continuity
for the Group, its clients plans provides an additional
and the wider global economy layer of mitigation and the
Group continues to actively
monitor and assess the potential
and realised impacts of COVID-19.
----------------------- -------------------------------------- -------------------------------------------
Patient risk Throughout the Group medicines The level of automation within
and medical devices can be the Group's packaging facilities
packaged, supplied or administered continues to increase. The
directly to patients. The serialisation of packaging
risk of inappropriate advice, processes continues and in
packaging, supply or administration addition, the use of electronic
could lead to a negative batch records will improve
patient experience. assurance and reduce the risk
of human error in packaging.
The implementation and utilisation
of validated software in our
patient support programs continues
with the introduction of an
electronic quality management
system in addition to our Health
Cloud CRM. Administration of
medicines to patients or providing
patient support is covered
by a detailed client contract
with the Marketing Authorisation
Holder (MAH), fully approved
scripts, and a divisional clinical
governance framework.
----------------------- -------------------------------------- -------------------------------------------
Regulatory The Group has many legal Maintenance of legal, regulatory
Compliance and regulatory obligations, and quality standards is a
including in respect of:(a) core value of the Group. The
protection of patient information Sharp Division is subjected
(such as HIPAA and GDPR); to routine FDA, EMEA and national
and (b) patient and employee agency inspections and so is
health and safety. In addition, required to be 'audit ready'
many of the Group's activities at all times. Patient education
are subject to stringent and information programmes
licensing regulations, for are reviewed to ensure compliance
example, FDA, EMEA and national with regulation and codes of
agency manufacturing, packaging practice and are subject to
and promotional regulations regular assessment by the Quality
and more recently the serialisation and Risk & Compliance teams.
requirements under the Falsified Regular data protection training,
Medicines Directive (FMD). gap analyses and auditing continues
A failure to meet any of across global locations with
these could result in regulatory a focus on local data protection
restrictions, financial penalties, law compliance.
the inability to operate,
or products and services
being defective, harming
patients and potentially
giving rise to very significant
liability.
----------------------- -------------------------------------- -------------------------------------------
IT Systems The ability of the Group The Group's technology and
to support operations and information systems and infrastructure
provide its services effectively are the subject of an ongoing
and competitively is dependent programme to ensure that they
on technology and information are capable of meeting the
systems that are appropriately Group's strategic intent and
integrated and that meet future requirements. Enhanced
current and anticipated future governance procedures are in
business, regulatory and place to ensure alignment with
security requirements. the strategic direction of
the Group.
----------------------- -------------------------------------- -------------------------------------------
Contract risk The underlying terms of the The Group has adopted processes
Group's commercial relationships for identifying and mitigating
drive the profitability of against undue risks in all
the Group. The nature of prospective commercial relationships,
the Group's business means supported by personnel with
that the Group could be exposed expertise and/or experience
to undue cost or liability in key commercial risk areas.
if it agrees inappropriate
terms.
----------------------- -------------------------------------- -------------------------------------------
Risk Impact Mitigation
----------------------- -------------------------------------- -------------------------------------------
Cyber security The global threat is increasing The Group has implemented multi-layered
due to the activities of information security defences
criminal organisations and to identify vulnerabilities
nation states targeting valuable and protect against attacks.
business and personal information To meet the increasing cyber
through increasingly sophisticated threat, our systems, procedures
means. These advanced and and resources are continuously
persistent threats are targeted being reviewed and enhanced
at business-critical data to detect and respond effectively
using, for example, phishing to cyber events. Cyber simulation
attempts, impersonation, software has been sourced to
and ransomware for financial ensure continuous user awareness.
and other gain.
----------------------- -------------------------------------- -------------------------------------------
Business continuity The Group is exposed to risks Group business continuity plans
that, should they arise, have been activated to varying
may give rise to the interruption degrees based upon the COVID-19
of critical business processes impacts on individual businesses.
that could adversely impact COVID-19 business continuity
the Group or its clients. responses include enhanced
COVID-19 has resulted in health and safety measures,
such interruptions with varying the use of technology to enable
impacts across Group businesses. remote working across much
of the organisation and the
virtual delivery of services
to clients, and cost control
measures.
----------------------- -------------------------------------- -------------------------------------------
Financial
----------------------- -------------------------------------- -------------------------------------------
Financial controls The Group's resources and The financial controls of the
finances must be managed Group, as well as their effectiveness,
in accordance with rigorous are monitored by the Board
standards and stringent controls. in the context of the standards
A failure to meet those standards to which the Group is subject
or implement appropriate and the expectations of its
controls may result in the stakeholders. This monitoring
Group's resources being improperly is supported by a dedicated
utilised or its financial internal audit function. The
statements being inaccurate Group's financial function,
or misleading. systems and controls are also
subject to periodic review
to ensure that they remain
robust and fit for purpose.
----------------------- -------------------------------------- -------------------------------------------
Liquidity The Group is exposed to liquidity, The management of the financial
interest rate, currency and risks facing the Group is governed
credit risks. by policies reviewed and approved
by the Board. These policies
primarily cover liquidity risk,
interest rate risk, currency
risk and credit risk. The primary
objective of the Group's policies
is to minimise financial risk
at a reasonable cost. The Group
does not trade in financial
instruments.
----------------------- -------------------------------------- -------------------------------------------
Foreign exchange The Group's reporting currency The majority of the Group's
is the U.S. dollar. Given activities are conducted in
the nature of the Group's the local currency of the country
businesses, exposure arises of operation. As a consequence,
in the normal course of business the primary foreign exchange
to other currencies, principally risk arises from the fluctuating
sterling and euro. value of the Group's net investment
in different currencies. Our
strategic intent is to proportionally
grow the U.S. as a source of
earnings at a faster rate than
other markets which will lower
the foreign exchange risk for
the Group.
----------------------- -------------------------------------- -------------------------------------------
Statement of Directors
in respect of the half-yearly financial report
Each of the directors confirms that to the best of their knowledge and belief:
-- the condensed set of interim financial statements comprising the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, and the related notes have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;
-- the half-yearly financial report includes a fair review of the information required by:
(a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.
The Group's auditor has not reviewed this condensed half-yearly financial report.
On behalf of the Board(i)
P. Gray B. McAtamney Director Director
18 May 2020
(i) The Board of UDG Healthcare plc is disclosed on the Company's website, www.udghealthcare.com.
Condensed consolidated income statement
for the six months ended 31 March 2020
Six months ended 31 March 2020 Six months ended 31 March 2019
Pre- Exceptional items (Unaudited) Total Pre- Exceptional items (Unaudited) Total
exceptional (Note 5) 31 March exceptional (Note 5) 31 March
items $'000 2020 items $'000 2019
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
$'000 $'000 $'000 $'000
Notes
Revenue 3 693,590 - 693,590 656,639 - 656,639
Cost of sales (491,046) - (491,046) (478,765) - (478,765)
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
Gross profit 202,544 - 202,544 177,874 - 177,874
Selling and
distribution
expenses (105,627) - (105,627) (96,812) - (96,812)
Administration
expenses (11,879) - (11,879) (11,384) - (11,384)
Other operating
expenses (21,524) - (21,524) (19,209) (15,164) (34,373)
Other operating
income 6 - 5,257 5,257 - - -
Transaction
costs (1,201) - (1,201) (813) - (813)
Share of joint
ventures'
profit/(loss)
after tax 4 954 - 954 (418) - (418)
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
Operating profit 63,267 5,257 68,524 49,238 (15,164) 34,074
Finance income 7 2,065 - 2,065 8,566 - 8,566
Finance expense 7 (8,319) - (8,319) (12,332) - (12,332)
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
Profit before
tax 57,013 5,257 62,270 45,472 (15,164) 30,308
Income tax
expense (11,395) 4,379 (7,016) (7,324) 209 (7,115)
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
Profit for the
financial
period 45,618 9,636 55,254 38,148 (14,955) 23,193
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
Profit
attributable
to:
Owners of the
parent 45,609 9,636 55,245 38,144 (14,955) 23,189
Non-controlling
interest 9 - 9 4 - 4
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
45,618 9,636 55,254 38,148 (14,955) 23,193
----------------- -------- -------------- ------------------------------- -------------- --- -------------- ------------------------------- --------------
Earnings per
ordinary share:
Basic earnings
per share -
cent 8 22.07 9.32
Diluted earnings
per share -
cent 8 22.03 9.27
Condensed consolidated statement of
comprehensive income
for the six months ended 31 March 2020
Six months ended
31 March 2020
Notes (Unaudited)
$'000
Profit for the financial period 55,254
Six months ended
31 March 2019
(Unaudited)
$'000
23,193
Other comprehensive income/(expense):
Items that will not be reclassified
to profit or loss:
Remeasurement gain/(loss) on Group
defined benefit schemes 16 2,719 (2,408)
Deferred tax on Group defined benefit
schemes (586) 535
----------------------------------------- ------- ------ -------------- -------- ---------
2,133 (1,873)
----------------------------------------- ------- ------ -------------- -------- ---------
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation adjustment 773 3,534
Group cash flow hedges:
- Effective portion of cash flow
hedges - movement into reserve 7,612 11,754
- Effective portion of cash flow
hedges - movement out of reserve - (6,412)
------ ------------------
Effective portion of cash flow
hedges 12 7,612 5,342
- Movement in deferred tax - movement
into reserve (952) (1,469)
- Movement in deferred tax - movement
out of reserve - 801
------ ------------------
Net movement in deferred tax 12 (952) (668)
----------------------------------------- ------- ------ -------------- -------- ---------
7,433 8,208
----------------------------------------- ------- ------ -------------- -------- ---------
Total other comprehensive income
for the period 9,566 6,335
----------------------------------------- ------- ------ -------------- -------- ---------
Total comprehensive income for
the period 64,820 29,528
----------------------------------------- ------- ------ -------------- -------- ---------
Total comprehensive income attributable
to:
Owners of the parent 64,804 29,524
Non-controlling interest 16 4
----------------------------------------- ------- ------ -------------- -------- ---------
64,820 29,528
----------------------------------------- ------- ------ -------------- -------- ---------
Condensed consolidated statement of changes in
equity
for the six months ended 31 March 2020
Attributable
Equity Other Retained to owners Non-controlling
share Share reserves earnings of the Interest Total
Capital Premium (Note parent Equity
12)
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2019 14,678 198,978 (142,759) 829,459 900,356 207 900,563
Change in
accounting
policy (Note 21) - - - 1,924 1,924 - 1,924
------------------- ---------- ---------- ------------ ----------- --------------- ----------------- ----------
Restated total
equity
at the beginning
of
the financial
year 14,678 198,978 (142,759) 831,383 902,280 207 902,487
------------------- ---------- ---------- ------------ ----------- --------------- ----------------- ----------
Profit for the
financial
period - - - 55,245 55,245 9 55,254
Other
comprehensive
income/(expense):
Effective portion
of
cash flow hedges - - 7,612 - 7,612 - 7,612
Deferred tax on
cash
flow hedges - - (952) - (952) - (952)
Translation
adjustment - - 766 - 766 7 773
Remeasurement gain
on defined
benefit
schemes - - - 2,719 2,719 - 2,719
Deferred tax on
defined
benefit schemes - - - (586) (586) - (586)
Total
comprehensive
income for the
period - - 7,426 57,378 64,804 16 64,820
Transactions with
shareholders:
New shares issued 31 24 - - 55 - 55
Issued in
settlement
of deferred
consideration(1) 40 6,160 - - 6,200 - 6,200
Share-based
payment
expense - - 2,628 - 2,628 - 2,628
Dividends paid to
equity
holders - - - (30,887) (30,887) - (30,887)
Release from
share-based
payment reserve - - (3,469) 3,469 - - -
At 31 March 2020 -
unaudited 14,749 205,162 (136,174) 861,343 945,080 223 945,303
------------------- ---------- ---------- ------------ ----------- --------------- ----------------- ----------
(1) The Company issued 723,775 ordinary shares in the period as a part settlement of the deferred consideration for the acquisition of STEM Marketing which the Group acquired in the year ended 30 September 2017.
Equity Attributable Non-
share Share Retained to owners controlling Total
earnings
capital premium Other of the interest equity
reserves parent
(Note
12)
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2018 14,643 197,837 (135,955) 808,647 885,172 171 885,343
Change in accounting
policy - - - 3,822 3,822 - 3,822
------------------------------ --------- -------- ---------- ---------- --------------- ------------ ----------
Restated total equity
at the beginning of
the financial year 14,643 197,837 (135,955) 812,469 888,994 171 889,165
------------------------------ --------- -------- ---------- ---------- --------------- ------------ ----------
Profit for the financial
period - - - 23,189 23,189 4 23,193
Other comprehensive
income/(expense):
Effective portion of
cash flow hedges - - 5,342 - 5,342 - 5,342
Deferred tax on cash
flow hedges - - (668) - (668) - (668)
Translation adjustment - - 3,534 - 3,534 - 3,534
Remeasurement loss
on defined benefit
schemes - - - (2,408) (2,408) - (2,408)
Deferred tax on defined
benefit schemes - - - 535 535 - 535
Total comprehensive
income for the period - - 8,208 21,316 29,524 4 29,528
Transactions with
shareholders:
New shares issued 6 679 - - 685 - 685
Share-based payment
expense - - 2,521 - 2,521 - 2,521
Dividends paid to equity
holders - - - (29,224) (29,224) - (29,224)
Release from share-based
payment reserve - - (621) 621 - - -
At 31 March 2019 -
unaudited 14,649 198,516 (125,847) 805,182 892,500 175 892,675
------------------------------ --------- -------- ---------- ---------- --------------- ------------ ----------
Condensed consolidated balance sheet
as at 31 March 2020
As at 31 March As at 31 March
2020 2019 As at 30 September 2019
(Unaudited) (Unaudited) (Audited)
Notes $'000 $'000 $'000
ASSETS
Non-current
Property, plant and equipment 9 182,122 181,529 176,305
Goodwill 10 570,309 513,606 547,520
Intangible assets 10 230,617 226,505 241,615
Investment in joint ventures and associates 10 11,104 9,497 10,216
Right of use assets 11 85,753 - -
Contract fulfilment assets 5,815 3,870 5,327
Derivative financial instruments 13 21,639 12,003 15,395
Deferred income tax assets 5,418 5,885 5,178
Employee benefits 16 9,535 9,652 7,636
Total non-current assets 1,122,312 962,547 1,009,192
--------------------------------------------- ------ --------------- ----------------- --------------------------
Current
Inventories 24,641 26,314 25,253
Trade and other receivables 380,315 375,210 370,350
Contract fulfilment assets 6,013 3,538 5,315
Cash and cash equivalents 13 151,123 169,215 135,228
Current income tax assets 2,235 814 4,385
Derivative financial instruments 13 8,993 2,704 8,878
Total current assets 573,320 577,795 549,409 --------------------------------------------- ------ --------------- ----------------- -------------------------- Total assets 1,695,632 1,540,342 1,558,601 --------------------------------------------- ------ --------------- ----------------- -------------------------- EQUITY Equity share capital 14,749 14,649 14,678 Share premium 205,162 198,516 198,978 Other reserves 12 (136,174) (125,847) (142,759) Retained earnings 861,343 805,182 829,459 --------------------------------------------- ------ --------------- ----------------- -------------------------- Equity attributable to owners of the parent 945,080 892,500 900,356 Non-controlling interest 223 175 207 Total equity 945,303 892,675 900,563 --------------------------------------------- ------ --------------- ----------------- -------------------------- LIABILITIES Non-current Interest-bearing loans and borrowings 13 174,875 240,681 174,734 Lease liabilities 13 83,515 - - Other payables 15,200 16,994 23,853 Provisions 14 79,765 49,724 74,193 Deferred income tax liabilities 39,394 42,694 39,263 Total non-current liabilities 392,749 350,093 312,043 --------------------------------------------- ------ --------------- ----------------- -------------------------- Current Interest-bearing loans and borrowings 13 65,119 21 65,297 Lease liabilities 13 15,353 - - Trade and other payables 258,816 258,175 246,685 Current income tax liabilities 2,273 14,868 14,380 Provisions 14 16,019 24,510 19,633 Total current liabilities 357,580 297,574 345,995 --------------------------------------------- ------ --------------- ----------------- -------------------------- Total liabilities 750,329 647,667 658,038 --------------------------------------------- ------ --------------- ----------------- -------------------------- Total equity and liabilities 1,695,632 1,540,342 1,558,601 --------------------------------------------- ------ --------------- ----------------- --------------------------
Condensed consolidated cash flow statement
for the six months ended 31 March 2020
Six months Six months
ended
ended 31 March
2019
31 March 2020 (Unaudited)
(Unaudited)
$'000 $'000
Cash flows from operating activities
Profit before tax 62,270 30,308
Finance income 7 (2,065) (8,566)
Finance expense 7 8,319 12,332
Exceptional items 5 (5,257) 15,164
------------------------------------------------ ------- ---------- ---------------------
Operating profit 63,267 49,238
Share of joint ventures' (profit)/loss
after tax 4 (954) 418
Transaction costs 1,201 813
Depreciation of property, plant and
equipment 9 11,331 11,764
Depreciation of right of use assets 11 8,128 -
Profit on disposal of property, plant
and equipment (26) (678)
Amortisation of intangible assets 10 21,524 19,208
Share-based payment expense 2,628 2,521
Increase in contract fulfilment assets (1,015) (403)
Decrease/(increase) in inventories 614 (7,943)
Increase in trade and other receivables (7,550) (12,023)
Increase in trade payables and other
payables 28,249 22,444
Exceptional items paid (5,732) (7,379)
Transaction costs paid (861) (689)
------------------------------------------------ ------- ---------- ---------------------
Cash generated from operations 120,804 77,291
Interest paid (5,930) (4,158)
Income taxes paid (17,348) (9,595)
------------------------------------------------ ------- ---------- ---------------------
Net cash inflow from operating activities 97,526 63,538
------------------------------------------------ ------- ---------- ---------------------
Cash flows from investing activities
Interest received 730 1,112
Purchase of property, plant and equipment (19,315) (17,661)
Proceeds from disposal of property,
plant and equipment 35 808
Investment in intangible assets - computer
software (3,826) (4,337)
Acquisition of subsidiaries (net of
cash and cash equivalents acquired) 15 (21,785) -
Deferred consideration paid (6,182) (22,889)
Deferred contingent consideration paid 14 (2,763) (772)
Disposal of subsidiaries (net of cash
and cash equivalents disposed) 6 9,924 -
------------------------------------------------ ------- ---------- ---------------------
Net cash outflow from investing activities (43,182) (43,739)
------------------------------------------------ ------- ---------- ---------------------
Cash flows from financing activities
Proceeds from issue of shares (including
share premium thereon) 55 685
Repayments of interest-bearing loans
and borrowings (158) -
Proceeds from interest-bearing loans
and borrowings 134 367
Principal elements of lease payments
(2019: decrease in finance leases) (7,906) (76)
Dividends paid to equity holders of
the Company (30,887) (29,224)
------------------------------------------------ ------- ---------- ---------------------
Net cash outflow from financing activities (38,762) (28,248)
------------------------------------------------ ------- ---------- ---------------------
Net increase/(decrease) in cash and
cash equivalents 15,582 (8,449)
Translation adjustment 313 (2,435)
Cash and cash equivalents at beginning
of period 135,228 180,099
------------------------------------------------ ------- ---------- ---------------------
Cash and cash equivalents at end of
period 151,123 169,215
------------------------------------------------ ------- ---------- ---------------------
Cash and cash equivalents is comprised
of:
Cash at bank and short-term deposits 151,123 169,215
------------------------------------------------ ------- ---------- ---------------------
Notes to the condensed interim financial statements
for the six months ended 31 March 2020
1. Reporting entity
UDG Healthcare plc (the "Company") is a company domiciled in Ireland. The unaudited condensed consolidated interim financial information of the Company for the six months ended 31 March 2020, are comprised of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in joint ventures and associates.
The financial information presented herein does not amount to statutory financial statements that are required by Section 347 of the Companies Act, 2014 to be annexed to the annual return of the Company. The financial information does not include all the information and disclosures required in the annual financial statements. The statutory financial statements for the year ended 30 September 2019 will be annexed to the annual return and filed with the Registrar of Companies . The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis.
2. Statement of compliance and basis of preparation
Basis of preparation
These unaudited condensed consolidated interim financial statements ("the interim accounts") for the six months ended 31 March 2020 have been prepared in accordance with IAS 34, Interim Financial Reporting, as endorsed by the European Union. These interim accounts do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published consolidated financial statements of the Group.
The preparation of interim financial statements requires the use of certain critical accounting estimates, judgements and assumptions. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, relate primarily to goodwill impairment testing, revenue recognition, income tax expense, employee benefit obligations, share-based payments and valuation of provisions. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Changes to key estimates and judgements in the six month period include: updates on the review of goodwill for impairment (Note 10); a change to certain actuarial assumptions (Note 16); and key judgments on the adoption of IFRS 16 Leases (Note 21). The income tax expense for the six month period is calculated by applying the directors' best estimate of the effective tax rate applicable to the profit for the period.
The Group has assessed the principal risks and uncertainties outlined on page 9, including the COVID-19 pandemic and the impact it is having on economic activity. The Group is actively monitoring the impact of COVID-19 and adopting cost control measures to mitigate against the potential future impact of weaker demand in some of our businesses. These measures have included: the reduction of appropriate variable costs; tight control of discretionary expenditure; a recruitment freeze; a pay reduction for Executive Management and the Board; and a temporary reduction in labour including reduced working hours and furloughing employees. There are also a number of COVID-19 government support schemes that are available to the Group in the jurisdictions where operations are located.
The financial impact of COVID-19 is not quantifiable due to the uncertainty over the length of time that the health crisis and related restrictions will continue to exist. The Group has modelled a number of scenarios including where the restrictions imposed as a result of the pandemic and the downturn in economic activity continues for the period to the end of September 2020. Further possible downside risk has been incorporated into forecasts through a widening of sensitivities.
In the scenarios modelled, the Group continues to have significant liquidity headroom on its existing financing facilities. At 31 March, the Group has
-- unrestricted cash and cash equivalents of $151.1 million;
-- unused committed debt facilities of up to $230 million from a multi-currency revolving senior bank credit facility expiring in May 2025; and
-- bank overdraft facilities of $5.5 million renewable on an annual basis.
The Group has a low gearing with a net debt of $58.2m and net debt to annualised EBITDA ratio of 0.3, excluding IFRS 16 lease liabilities. The next debt repayment of approximately $58 million is due in September 2020, and there are no material debt maturities thereafter until September 2023.
Having considered the Group's forecasts, sensitivity analysis and the Group's significant financial headroom, the directors have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.
As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.udghealthcare.com. However, if a physical copy is required, please contact the Company Secretary.
Accounting policies
The accounting policies applied in the interim accounts are the same as those applied in the 2019 Annual Report, except for the adoption of new standards, interpretations and standard amendments effective for the Group for the period commencing 1 October 2019. The Group has had to change its accounting policies as a result of adopting IFRS 16 Leases. Details on the impact of adoption of new accounting standards and interpretations are outlined in Note 21.
3. Segmental analysis
The Group's operations are divided into the following operating segments each of which operates in a distinct sector of the healthcare services market:
Ashfield - Ashfield is a global leader in commercialisation services for the pharmaceutical and healthcare industry, operating across three broad areas of activity: advisory, communications and commercial & clinical services. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.
Sharp - Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state-of-the-art facilities in the US and Europe.
The segmental analysis of the business corresponds with the Group's organisational structure and the Group's internal reporting for the purpose of managing the business and assessing performance as reviewed by the Group's Chief Operating Decision Maker (CODM), which the Group has defined as Brendan McAtamney (Chief Executive Officer). The amount of revenue and operating profit under the Group's operating segments is as follows:
Six months Six months
ended ended
31 March 31 March
2020 2019
$'000 $'000
Revenue
Ashfield 507,839 491,027
Sharp 185,751 165,612
693,590 656,639
------------------------------------------------------------------------------------------ ----------- -------------
Operating profit before acquired intangible amortisation, transaction costs and
exceptional
items
Ashfield 58,596 47,408
Sharp 22,702 18,194
81,298 65,602
Amortisation of acquired intangibles (16,830) (15,551)
Transaction costs (1,201) (813)
Exceptional items 5,257 (15,164)
------------------------------------------------------------------------------------------ ----------- -------------
Operating profit 68,524 34,074
Finance income 2,065 8,566
Finance expense (8,319) (12,332)
------------------------------------------------------------------------------------------ ----------- -------------
Profit before tax 62,270 30,308
------------------------------------------------------------------------------------------ ----------- -------------
Income tax expense (7,016) (7,115)
------------------------------------------------------------------------------------------ ----------- -------------
Profit after tax for the period 55,254 23,193
------------------------------------------------------------------------------------------ ----------- -------------
Disaggregated revenue Six months ended 31 March 2020
--------------------------------------
Point in time
Over time $'000 Total
$'000 $'000
--------------------------- ------------ -------------- --------
Ashfield
Communications & Advisory 220,363 - 220,363
Commercial & Clinical 286,010 1,466 287,476
--------------------------- ------------ -------------- --------
Ashfield 506,373 1,466 507,839
--------------------------- ------------ -------------- --------
Sharp 184,622 1,129 185,751
--------------------------- ------------ -------------- --------
Group 690,995 2,595 693,590
--------------------------- ------------ -------------- --------
Six months ended 31 March 2019
--------------------------------------
Point in time
Over time $'000 Total
$'000 $'000
--------------------------- ------------ -------------- --------
Ashfield
Communications & Advisory 174,619 - 174,619
Commercial & Clinical 314,994 1,414 316,408
--------------------------- ------------ -------------- --------
Ashfield 489,613 1,414 491,027
--------------------------- ------------ -------------- --------
Sharp 161,245 4,367 165,612
--------------------------- ------------ -------------- --------
Group 650,858 5,781 656,639
--------------------------- ------------ -------------- --------
Revenue is recognised when a customer obtains control of a good or service and therefore has the ability to direct the use and obtain the benefits from the good or service. Revenue is recognised over time where i) there is a continuous transfer of control to the customer; or ii) there is no alternative use for any asset created and there is an enforceable right to payment for performance completed to date. Other revenue contracts are recognised at a point in time when control of the good or service transfers to the customer.
Geographical analysis of revenue
Six months Six months
ended ended
31 March 31 March
2020 2019
$'000 $'000
---------------------------------- ------------- -------------
Republic of Ireland 2,696 3,403
United Kingdom 126,286 127,145
North America 454,634 414,662
Rest of the World 109,974 111,429
---------------------------------- ------------- -------------
693,590 656,639
---------------------------------- ------------- -------------
4. Share of joint ventures' profit/(loss) after tax
Six months Six months
ended ended
31 March 31 March
2020 2019
$'000 $'000
Revenue 39,706 33,196
Expenses, including tax (37,798) (34,032)
------------------------------------------ ------------- -------------
Profit/(loss) after tax 1,908 (836)
------------------------------------------ ------------- -------------
Group's equity interest 49.99% 49.99%
------------------------------------------ ------------- -------------
Group's share of profit/(loss) after tax 954 (418)
------------------------------------------ ------------- -------------
5. Exceptional items
Exceptional items are those which, in management's judgement, should be disclosed separately by virtue of their nature or amount. Such items are included within the Income Statement caption to which they relate and are separately disclosed in the notes to the Group Interim Financial Statements. The Group realised an exceptional gain of $9.6 million after tax in the period.
The Group reports the following exceptional items:
Six months Six months
ended ended
31 March 31 March
2020 2019
$'000 $'000
Gain on disposal of subsidiary 5,257 -
Legal costs and settlements - (15,164)
Net exceptional items pre-tax 5,257 (15,164)
Exceptional tax credit 4,420 -
Tax effect of exceptional items (41) 209
---------------------------------- ------------- -------------
Net exceptional items after tax 9,636 (14,955)
---------------------------------- ------------- -------------
In January 2020, Ashfield disposed of Ashfield Pharmacovigilance, a U.S. based subsidiary that provides safety and risk management services supporting healthcare organisations. The business was not considered core to Ashfield's operations. As further outlined in note 6, the disposal resulted in a gain of $5.3 million. The related tax charge was $0.1 million.
In the measurement of the Group's current tax liabilities, there are transactions and calculations, for which the ultimate tax determination can be both complex and uncertain. During the period, the Group recognised a credit of $4.4 million on the remeasurement of current tax liabilities as a consequence of the resolution of a historic uncertain tax position.
In the prior period, the Group recognised $15.0 million of an exceptional charge after tax primarily relating to the settlement of a claim relating to the Group's disposal of United Drug in 2016 and other legal costs relating to protecting an Ashfield trademark.
6. Disposal of subsidiaries
On 10 January 2020 the Group completed the disposal of Ashfield Pharmacovigilance, which was part of the Ashfield operating segment, based in the U.S. The following tables summarise the consideration received, profit on disposal and the net cash flow arising on the disposal:
Six months
ended
31 March
2020
$'000
Consideration
Cash consideration received 10,924
Total consideration received 10,924
Assets and liabilities disposed of
Property, plant and equipment 1,004
Intangible assets 198
Goodwill 1,450
Deferred tax assets 213
Trade and other receivables 2,165
Trade and other payables (529)
Cash and cash equivalents 1,000
------------------------------------------------ ----------
Net assets disposed of 5,501
------------------------------------------------ ----------
Gain on disposal
Total consideration received 10,924
Net assets disposed of (5,501)
Disposal costs (166)
------------------------------------------------ ----------
Net profit on disposal of subsidiaries 5,257
------------------------------------------------ ----------
Net cash flow from disposal of subsidiaries
Cash and cash equivalents received 10,924
Cash and cash equivalents disposed of (1,000)
------------------------------------------------ ----------
Net cash inflow from disposal of subsidiaries 9,924
------------------------------------------------ ----------
The cash inflow from disposal of subsidiaries is presented within cash flows from investing activities in the Group Cash Flow Statement. The net gain on disposal is presented as an exceptional item (Note 5) within other operating income.
7. Finance income and expense
Six months Six months
ended ended
31 March 31 March
2020 2019
$'000 $'000
Finance income
Income arising from cash deposits 684 1,240
Fair value adjustments to guaranteed senior unsecured loan notes 172 627
Foreign currency gain on retranslation of guaranteed senior unsecured loan notes 1,179 6,412
Ineffective portion of cash flow hedges - 88
Net finance income on pension scheme obligations 30 199
---------------------------------------------------------------------------------- ------------- -------------
2,065 8,566
---------------------------------------------------------------------------------- ------------- -------------
Finance expense
Interest on bank loans and other loans
-wholly repayable within 5 years (3,494) (3,569)
-wholly repayable after 5 years (926) (955)
Interest on lease liabilities (2019: Interest on finance leases) (1,526) (1)
Interest on overdrafts (53) (30)
Interest on deferred acquisition consideration - (99)
Unwinding of discount on provisions (969) (639)
Fair value adjustments to fair value hedges (172) (627)
Fair value of cash flow hedges transferred to equity (1,179) (6,412)
(8,319) (12,332)
---------------------------------------------------------------------------------- ------------- -------------
Net finance expense (6,254) (3,766)
---------------------------------------------------------------------------------- ------------- -------------
8. Earnings per ordinary share
Six months Six months
ended ended
31 March 31 March
2020 2019
$'000 $'000
Profit attributable to owners of the
parent 55,245 23,189
Adjustment for amortisation of acquired
intangible assets (net of tax) 12,591 11,909
Adjustment for transaction costs (net
of tax) 1,083 773
Adjustment for exceptional items (net
of tax) (9,636) 14,955
Adjusted profit attributable to owners
of the parent 59,283 50,826
-------------------------------------------------- ------ -------------- ------------
2020 2019
Number Number
of shares of shares
Weighted average number of shares 250,273,185 248,802,272
Number of dilutive shares under option 513,713 1,267,485
Weighted average number of shares, including
share options 250,786,898 250,069,757
--------------------------------------------------- ----- -------------- ------------
2020 2019
Basic earnings per share
- $ cent 22.07 9.32
Diluted earnings per share
- $ cent 22.03 9.27
Adjusted basic earnings per
share - $ cent(1) 23.69 20.43
Adjusted diluted earnings
per share - $ cent(1) 23.64 20.32
(1) Adjusted profit attributable to owners of the parent in the six months ended 31 March 2020 is stated before the amortisation of acquired intangible assets ($12.6m, net of tax), transaction costs ($1.1m, net of tax), and exceptional items ($9.6m, net of tax).
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-GAAP measurements provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration.
Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of earnings per share. A total of 2,197,997 (2019: 2,247,738) 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 period.
9. Property, plant and equipment
Land and Plant and Computer Assets under
buildings equipment Motor vehicles equipment construction Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2019
Opening net book
amount 84,088 82,160 38 5,530 4,489 176,305
Additions in the
period 485 14,849 - 1,437 813 17,584
Arising on
acquisition - 327 - 33 - 360
Depreciation (2,231) (7,269) - (1,831) - (11,331)
Disposals in
period - (2) - (7) - (9)
Disposal of
subsidiaries (757) (247) (1,004)
Reclassifications (4,518) 6,519 (36) 887 (2,852) -
Translation
adjustment 108 68 - (8) 49 217
------------------- ---------------- --------------- --------------- ----------------
At 31 March 2020 77,932 95,895 2 5,794 2,499 182,122
------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
At 31 March 2020
Cost or deemed
cost 118,420 188,099 47 27,728 2,499 336,793
Accumulated
depreciation (40,488) (92,204) (45) (21,934) - (154,671)
------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
Net book amount 77,932 95,895 2 5,794 2,499 182,122
------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
10. Movement in goodwill, intangible assets and investment in joint ventures and associates
Investment
Intangible in joint
Goodwill assets ventures
and associates
$'000 $'000 $'000
At 1 October 2019 547,520 241,615 10,216
Investment in computer software - 3,826 -
Amortisation of acquired intangible
assets - (16,830) -
Amortisation of computer software - (4,694) -
Arising on acquisitions 23,152 6,120 -
Disposal of subsidiaries (1,450) (198) -
Share of joint ventures' profit
after tax - - 954
Translation adjustment 1,087 778 (66)
At 31 March 2020 570,309 230,617 11,104
------------------------------------- ----------- ------------- ----------------
The Group has performed a half year assessment of impairment risk. The scenarios outlined in note 2 have been incorporated in the half year impairment review. The discount rate applied in reviewing impairment incorporate an additional COVID-19 risk factor and sensitivity analysis has been widened on discount rates and cash flow forecasts.
As previously disclosed in the 2019 Annual Report, the Ashfield Commercial & Clinical UK cash generating unit ('CGU') is sensitive to changes in key assumptions, in particular to changes in the discount rate. The goodwill allocated to the CGU is $35.8 million and the excess of value-in-use over carrying value from the impairment review was $9.0m. If the discount rate used in the model was increased by 0.9% there would be no headroom in the CGU, holding all other variables constant. While the base impairment model does not indicate that an impairment exists in the CGU, should the underlying assumptions and forecasts attributable to the CGU differ in the future, this may result in an impairment of goodwill of the CGU.
11. Right of use assets
Six months
ended
31 March
2020
$'000
At 1 October 2019 (Note 21) 81,161
Additions 12,854
Arising on acquisition 253
Depreciation (8,128)
Termination of lease contracts (231)
Modification of lease contracts 137
Translation adjustment (293)
At 31 March 2020 85,753
----------------------------------- -----------
12. Other reserves
Cash Capital
flow Share-based Foreign Treasury redemption
hedge payment exchange shares reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 October 2019 (7,816) 16,605 (144,219) (7,676) 347 (142,759)
Effective portion of
cash flow hedges 7,612 - - - - 7,612
Deferred tax on cash
flow hedges (952) - - - - (952)
Share-based payment
expense - 2,628 - - - 2,628
Release from share-based
payment reserve - (3,469) - - - (3,469)
Translation adjustment - - 766 - - 766
-------------------------- -------- ------------ ---------- --------- ------------ ----------
At 31 March 2020 (1,156) 15,764 (143,453) (7,676) 347 (136,174)
-------------------------- -------- ------------ ---------- --------- ------------ ----------
13. Net debt
As at As at As at
31 March 31 March 30 Sept
2020 2019 2019
$'000 $'000 $'000
Current assets
Cash at bank and short-term deposits 151,123 169,215 135,228
Derivative financial instruments 8,993 2,704 8,878
Non-current assets
Derivative financial instruments 21,639 12,003 15,395
Current liabilities
Interest-bearing loans and borrowings (65,119) - (65,278)
Finance leases - (21) (19)
Non-current liabilities
Interest-bearing loans and borrowings (174,875) (240,680) (174,704)
Finance leases - (1) (30)
Net debt (58,239) (56,780) (80,530)
--------------------------------------- ----------- ---------- ----------
Current liabilities
Lease liabilities (15,353) - -
Non-current liabilities
Lease liabilities (83,515) - -
--------------------------------------- ----------- ---------- ----------
Net debt including lease liabilities (157,107) (56,780) (80,530)
--------------------------------------- ----------- ---------- ----------
14. Provisions
Restructuring
Deferred contingent Onerous and
consideration leases other costs Total
$'000 $'000 $'000 $'000
At 1 October 2019 78,184 1,537 14,105 93,826
Release to income statement - - (118) (118)
Arising on acquisition 10,461 - - 10,461
Utilised during the period (2,763) (58) (5,674) (8,495)
Unwinding of discount 969 - - 969
Reclassification - (1,310) 240 (1,070)
Translation adjustment 43 8 160 211
----------------------------- ---------------------- ---------- -------------- --------
At 31 March 2020 86,894 177 8,713 95,784
----------------------------- ---------------------- ---------- -------------- --------
Non-current 79,761 - 4 79,765
Current 7,133 177 8,709 16,019
Total 86,894 177 8,713 95,784
----------------------------- ---------------------- ---------- -------------- --------
The Group availed of the practical expedient on adoption of IFRS 16 Leases to rely on the assessment of whether leases are onerous applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Consequently, right of use assets were adjusted on transition by the amount of the provisions for onerous leases recognised at 30 September 2019. The remaining onerous lease balance relates to a lease with a lease term of less than one year from the date of adoption of the standard (Note 21).
15. Acquisition of subsidiary undertakings
The Group completed the acquisition of 100% of Canale Communications, Inc. ('CanaleComm') on 12 November 2019. CanaleComm is a U.S.-based healthcare strategic communications agency, with specialist capabilities in corporate communications, public relations and investor relations. CanaleComm is presented as part of the Ashfield operating segment, and significantly strengthens the Group's public relations offering in the U.S.
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of the above acquisition due to the recent acquisition date. Any amendments to these acquisition fair values within the 12-month timeframe from the date of acquisition will be disclosed in the 2020 Annual Report as stipulated by IFRS 3 Business Combinations.
Arising on
Acquisition
$'000
Property, plant and equipment 360
Right of use assets 253
Intangible assets - arising on acquisition 6,120
Trade and other receivables 1,854
Trade and other payables (640)
Lease liabilities (253)
Deferred tax liabilities (100)
Cash acquired 60
------------------------------------------------------------------- ------- Net assets acquired 7,654 Goodwill 23,152 ------------------------------------------------------------------- ------- Consideration 30,806 Satisfied by: Cash consideration 20,345 Deferred contingent consideration 10,461 ------------------------------------------------------------------- ------- Total consideration 30,806 ------------------------------------------------------------------- ------- Net cash outflow - arising on acquisitions Cash consideration 20,345 Less: Cash and cash equivalents (60) ------------------------------------------------------------------- ------- Net cash outflow - Business combinations completed in the period 20,285 Deposit in escrow for business combinations (Note 22) 1,500 ------------------------------------------------------------------- ------- Net cash outflow 21,785 ------------------------------------------------------------------- -------
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 business acquired, 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 goodwill arising from acquisitions that is expected to be tax deductible is $23,152,000.
The intangible assets arising on the acquisition primarily relate to the trade names, customer relationships, and customer contracts. The gross contractual value of trade and other receivables on acquisition amounted to $1,874,000. The fair value of trade and other receivables recognised on acquisition was $1,854,000. No contingent liabilities were recognised on the acquisition completed during the six month period ended 31 March 2020.
The total transaction related costs for completed and aborted acquisitions amounts to $1,201,000. These are presented separately in the Group Income Statement.
Contingent consideration is payable to the sellers of CanaleComm after three years, based on the achievement of certain profit targets. The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payments to present value at the acquisition date. For contingent consideration to become payable, the pre-defined profit thresholds must be achieved by the acquired business. On an undiscounted basis, the future payments for which the Group may be liable in respect of the current period acquisition ranges from $nil to $11,000,000.
The Group's results for the six month period ended 31 March 2020 included the following amounts in respect of the business acquired during the period:
Six months
ended
31 March
2020
$'000
Revenue 3,772
------------------------ -------------
Profit for the period 406
------------------------ -------------
The proforma revenue and profit of the Group for the six month period ended 31 March 2020 would have been $694,344,000 and $55,294,000 respectively had the acquisition taken place at the start of the reporting period. The proforma results for the period include the estimate of tax expense and amortisation of intangible assets recognised on acquisition.
16. Employee benefits
Employee
benefit
asset
$'000
Employee benefit asset at 1 October 2019 7,636
Current service cost (1,627)
Interest 30
Contributions paid 809
Remeasurement gain 2,719
Translation adjustment (32)
------------------------------------------------- ---------
Employee benefit asset at 31 March 2020 9,535
------------------------------------------------- ---------
As set out in the consolidated financial statements for the year ended 30 September 2019, the Group operates a number of defined benefit pension schemes which are funded by the payments of contributions to separately administered trust funds. The ROI schemes have a remeasurement gain in the period arising from a change in the assumptions used to measure liabilities of the plan. The U.S. scheme has a remeasurement loss in the period resulting from lower than expected returns on plan assets. In the ROI schemes, there is no longer a salary increase assumption due to the accrual of pension benefits ceasing from 1 December 2015.
The principal assumptions are as follows:
Republic of Ireland Schemes United States Scheme
As at As at As at As at
31 March 30 September 31 March 30 September
2020 2019 2020 2019
Rate of increase
in salaries n/a n/a 2.75-4.00% 2.75-4.00%
Rate of increase
in pensions 0-1.00% 0-1.25% 0.00% 0.00%
Inflation rate 1.00% 1.25% 2.75% 2.75%
Discount rate 1.85% 0.85% 3.00% 3.00%
17. Financial instruments
The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed consolidated balance sheet at 31 March 2020, are as follows:
Carrying value Fair value
$'000 $'000
Financial assets
Trade and other receivables 354,799 354,799
Derivative financial assets 30,632 30,632
Cash and cash equivalents 151,123 151,123
---------------------------------------- --------------- -----------
536,554 536,554
--------------------------------------- --------------- -----------
Financial liabilities
Trade and other payables 169,419 169,419
Interest-bearing loans and borrowings 239,994 239,994
Lease liabilities 98,868 98,868
Deferred contingent consideration 86,894 86,894
---------------------------------------- --------------- -----------
595,175 595,175
--------------------------------------- --------------- -----------
The fair values of the financial assets and liabilities disclosed in the above tables have been determined using the methods and assumptions set out below.
Trade and other receivables/payables
For receivables and payables the carrying value less impairment provision is deemed to reflect fair value, where appropriate.
Cash and cash equivalents
For cash and cash equivalents, the nominal amount is deemed to reflect fair value.
Interest-bearing loans and borrowings (excluding lease liabilities)
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.
Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.
Valuation techniques and significant unobservable inputs
Fair value hierarchy of assets and liabilities measured at fair value
The Group has adopted the following fair value hierarchy in relation to its financial instruments that are carried in the balance sheet at fair value as at the period end:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices); and
-- Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table sets out the fair value of all financial assets and liabilities that are measured at fair value:
Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
Assets measured at fair value
Designated as hedging instruments
Cross currency interest rate
swaps - 30,632 - 30,632
---------------------------------- ------- ------- ------- ------
- 30,632 - 30,632
---------------------------------- ------- ------- ------- ------
Liabilities measured at fair
value
At fair value through profit
or loss
Deferred contingent consideration - - 86,894 86,894
---------------------------------- ------- ------- ------- ------
- - 86,894 86,894
---------------------------------- ------- ------- ------- ------
Summary of derivatives:
Amount
Amount of Related of financial Related
financial amounts assets/liabilities amounts
assets/liabilities not offset as presented not offset
as presented in the 31 March in the in the 31 March
in the balance balance 2020 balance balance 2019
sheet sheet Net sheet sheet Net
$'000 $'000 $'000 $'000 $'000 $'000
Derivative
financial
assets 30,632 - 30,632 14,707 - 14,707
Derivative
financial
liabilities - - - - - -
-------------- --------------------- ------------- ----------- --------------------- ------------- -----------
All derivatives entered into by the Group are included in Level 2 of the fair value hierarchy and consist of cross currency interest rate 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 movements in the period are included in Note 14. The deferred contingent consideration liability arises from acquisitions completed by the Group. The fair value is determined considering the expected payment, discounted to present value using a risk-adjusted discount rate. The expected payment is determined separately in respect of each individual earn out 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 financial years 2017 to 2020.
The significant unobservable inputs are:
-- forecasted weighted average EBIT growth rate 14.6% (2019: 13%); and -- risk adjusted discount rate 0.7% - 2.8% (2019: 0.02% - 2.75%).
Inter-relationship between significant unobservable inputs and fair value measurement:
The estimated fair value would increase/(decrease) if:
-- the EBIT growth rate was higher/(lower); and -- the risk adjusted discount rate was lower/(higher).
For the fair value of deferred contingent consideration, a reasonable possible change to one of the significant unobservable inputs at 31 March 2020, holding the other inputs constant, would have the following effects:
Increase Decrease
$'000 $'000
--------------------------------------------------- --------- ---------
Effect of change in assumption on income statement
Annual EBIT growth rate (1% movement) 742 (801)
Risk-adjusted discount rate (1% movement) (1,792) 1,827
--------------------------------------------------- --------- ---------
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.
31 March
31 March 2020 2019
Times Times
Net debt to annualised EBITDA 0.3 0.3
Annualised EBITDA interest cover 27.2 24.1
-------------------------------------- ---------------- ---------
The financial ratios calculated above exclude the impact of IFRS 16, in line with financial covenant requirements.
18. Dividends
During the first half of the financial year, the final dividend for 2019 (12.34 $ cent per share) was paid, giving rise to a reduction in shareholders' funds of $30,887,000.
19. Foreign currency
The principal exchange rates used in translating sterling and euro balance sheets and income statements were as follows:
31 March 31 March
2020 2019
$1=StgGBP $1=StgGBP
Balance sheet (closing rate) 0.8091 0.7640
Income statement (average rate) 0.7797 0.7725
$1=EuroEUR $1=EuroEUR
Balance sheet (closing rate) 0.9127 0.8901
Income statement (average rate) 0.9051 0.8783
20. Related parties
The Group trades in the normal course of business with its joint venture undertakings. The aggregate value of these transactions is not material in the context of the Group's financial results.
The Group's investment in Magir Limited has been classified as an asset held for sale at 31 March 2020. The Group has provided a loan to Magir, gross of interest, of StgGBP11,958,000 (2019: StgGBP11,561,000).
IAS 24 Related Party Disclosures requires the disclosure of compensation paid to the Group's key management personnel. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. UDG Healthcare classifies directors, the Company Secretary and members of its executive team as key management personnel. This executive team is the body of senior executives that formulates business strategy along with the directors, follows through on the implementation of that strategy and directs and controls the activities of the Group on a day to day basis.
Key management personnel receive compensation in the form of short-term employee benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of $4,466,000 for the six months ended 31 March 2020 (2019: $6,009,000).
21. Changes in accounting policies
This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements and the new accounting policies that have been applied from 1 October 2019, where they are different to those applied and disclosed in the 2019 Annual Report.
New and amended standards and interpretations effective during 2020
IFRS 16 Leases
IFRS 16 replaced IAS 17 Leases and related interpretations. The standard addresses the definition of a lease, recognition and measurement of leases, and establishes principles for reporting useful information to users of financial statements about leasing activities. A key change arising from IFRS 16 is that most of the leases previously accounted for as operating leases under IAS 17 are now accounted for on the Balance Sheet, similar to the accounting for finance leases previously.
Accounting policy
All leases are accounted for by recognising a right of use asset and a lease liability except for:
-- Leases of low value assets; and -- Leases with a duration of 12 months or less.
Such leases are accounted for on a straight line expense basis.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, discounted using the rate inherent in the lease unless this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period in which they relate.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
-- Lease payments made at or before the commencement of the lease; -- Initial direct costs incurred; and
-- The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged on the balance outstanding and are reduced for lease payments made. Right of use assets are amortised on a straight line basis over the remaining term of the lease or over the remaining economic life of the asset if this is determined to be shorter than the lease term.
When the estimate of the term of any lease is revised, for example due to reassessing the probability of exercising an extension or termination option, the carrying amount of the lease liability is adjusted to reflect the payments to be made over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is also revised when the variable element of future lease payments dependent on a rate or index is revised, except in this case the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right of use asset, with the revised carrying amount being amortised over the remaining revised lease term.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification. If the renegotiation results in one or more additional assets being leased for an amount equal to the standalone price for the additional right of use assets obtained, the modification is accounted for as a separate lease in accordance with the above policy. In all other cases where the renegotiation increases the scope of the lease, the lease liability is remeasured using the discount rate applicable on the modification date, with the right of use asset being adjusted by the same amount. If the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right of use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right of use asset is adjusted by the same amount.
For contracts that include both a right to the Group to use an identified asset and require services to be provided to the Group by the lessor, the Group has elected to separate the non-lease components and exclude these from the lease liability calculations.
Implementation of IFRS 16
IFRS 16 was adopted by the Group on 1 October 2019 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application, without restatement of comparative figures. With this approach, lease liabilities and right of use assets were recognised for the remaining lease payments on identified lease contracts at date of application, discounted at the appropriate incremental borrowing rate. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed.
The impact of adopting the new standard on the Group Balance Sheet as at 1 October 2019 is outlined as follows:
1 October
30 September 2019 IFRS 16 2019
Previously reported Adjustments Adjusted
$'000 $'000 $'000
--------------------------------- --------------------- ------------- ----------
Non-current assets
Right of use assets - 81,161 81,161
Deferred income tax assets 5,178 1,936 7,114
Current assets
Trade and other receivables 370,350 (868) 369,482
Equity
Retained earnings 829,459 1,924 831,383
Non-current liabilities
Interest-bearing loans
and borrowings 174,734 (30) 174,704
Lease liabilities - 79,467 79,467
Other payables 23,853 (7,630) 16,223
Provisions 74,193 (181) 74,012
Deferred income tax liabilities 39,263 12 39,275
Current liabilities
Interest-bearing loans
and borrowings 65,297 (19) 65,278
Lease liabilities - 14,620 14,620
Trade and other payables 246,685 (5,045) 241,640
Provisions 19,633 (889) 18,744
--------------------------------- --------------------- ------------- ----------
The Group's total future minimum lease payments under non-cancellable operating leases at 30 September 2019 amounted to $125,497,000 and are reconciled to the lease liability recognised at 1 October 2019 as follows:
Plant,
Land & Equipment,
Reconciliation of operating lease commitments Buildings Motor Vehicles & Other Total
to IFRS 16 lease liability on transition $'000 $'000 $'000 $'000
---------------------------------------------- ---------- -------------- ----------- --------
Operating lease commitments under IAS
17 at 30 September 2019 112,070 10,800 2,327 125,197
Adjusted for impact of:
Finance lease liabilities recognised
under IAS 17 as at 30 September 2019 - - 49 49
Short-term leases not recognised as a
liability (1) (904) (4,320) - (5,224)
Low-value leases not recognised as a
liability (2) - - (1,523) (1,523)
Different treatment of extension and
termination options (3) 4,034 103 - 4,137
Separation of non-lease components from
the lease contracts (4) (6,022) (1,110) (110) (7,242)
Lease contracts not yet commenced (5) (9,185) - - (9,185)
Effect of discounting the lease liability
(6) (11,875) (221) (26) (12,122)
---------------------------------------------- ---------- -------------- ----------- --------
IFRS 16 Lease liability on adoption at
1 October 2019 88,118 5,252 717 94,087
---------------------------------------------- ---------- -------------- ----------- --------
(Notes)
(1) Relates to leases which are ending within 1 year or less of the date of transition and are therefore excluded from the IFRS 16 lease liability as a result of applying the recognition exemption for short-term leases.
(2) Relates to leases of assets that qualify as low-value assets and are therefore excluded from the IFRS 16 lease liability as a result of applying the recognition exemption for leases of low-value assets. These leases primarily relate to leases of IT, office and telephony equipment which are not individually material.
(3) Differences between the non-cancellable periods of the in-scope leases which are used to calculate the operating lease commitments, and the lease terms used to calculate the lease liability under IFRS 16 which include periods covered by an option to extend the lease if the lessee is reasonably certain to exercise such options, and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise such options. As part of the transition to IFRS 16, management judgement has been applied to assess whether options included in the in-scope lease contracts will be executed.
(4) Adjustments to remove non-lease components included in operating lease commitments from the IFRS 16 lease liability, in accordance with the Group accounting policy being applied on transition.
(5) Refers to lease contracts that have been signed as at the transition date but that have not yet commenced as the asset is not available for use.
(6) Impact of discounting the remaining lease payments on identified lease contracts as at the transition date, using the appropriate incremental borrowing rate.
Significant accounting estimates and judgements - Leases
Judgement is used in determining whether an extension or termination option will be exercised. Extension options and periods after termination options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. All facts and circumstances that create an incentive to exercise an extension option or to not exercise a termination option are considered, including:
-- If there are significant penalties to terminate a lease, the Group is typically reasonably certain to not terminate the lease.
-- If the rental terms are favourable to current market terms, the Group is typically reasonably certain to extend the lease, or to not exercise a termination option.
-- If leasehold improvement assets are considered to have a significant remaining value, the Group is typically reasonably certain to extend the lease, or to not terminate the lease.
Other factors considered in determining whether a lease extension option or lease termination option will be exercised include historical lease durations, the availability of alternative similar properties in the market, and the costs and business disruption to replace the leased asset. The lease term is reassessed if there is a significant change in circumstances within the Group's control that affects the determination of whether an extension or termination would be exercised.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 clarified how to recognise and measure uncertainties over income tax treatments. The Group already provides for tax uncertainties in the recognition and measurement of the income tax expense and current tax liabilities. The impact of implementing IFRIC 23 did not have a material impact on the financial statements.
A number of other changes to IFRS became effective in the period beginning on 1 October 2019, however they did not have a material effect on the Group accounting policies and the interim accounts.
22. Events after the balance sheet date
Acquisition of QPSI Macungie
In May 2020, the Group completed the acquisition of QPSI Macungie, a U.S.-based packaging facility for consideration of $5.2 million. The facility provides further primary, secondary and tertiary packaging space, warehouse facilities and additional capacity to expand. The acquisition provides a solution to expand Sharp's capacity in the Allentown area. The facility employs approximately 110 people and will be reported in the Group's Sharp segment.
Due to the short time frame between completion date and the date of issuance of this report, an initial assignment of fair values to identifiable assets and liabilities acquired has not been completed.
23. Board approval
This interim report was approved by the Board of Directors of UDG Healthcare plc on 18 May 2020.
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 set out below.
Net revenue
Definition
This comprises of revenue as reported in the Group Income Statement, adjusted for revenue associated with pass-through costs for which the Group does not earn a margin.
Six months Six months
ended ended
31 March 31 March
2020 2019
Calculation $'000 $'000
----------------------- ----------------- --- ---------- ----------
Revenue Income Statement 693,590 656,639
Pass - through revenue (97,416) (110,474)
----------------------------------------------- ---------- ----------
Net revenue 596,174 546,165
----------------------------------------------- ---------- ----------
Adjusted operating profit
Definition
This comprises of operating profit as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).
Six months Six months
ended ended
31 March 31 March
2020 2019
Calculation $'000 $'000
------------------------------------ ----------------- --- ---------- ----------
Operating profit Income Statement 68,524 34,074
Transaction costs Income Statement 1,201 813
Amortisation of acquired intangible
assets Note 10 16,830 15,551
Exceptional items Note 5 (5,257) 15,164
------------------------------------ ---------------------- ---------- ----------
Adjusted operating profit 81,298 65,602
------------------------------------------------------------ ---------- ----------
Adjusted profit before tax
Definition
This comprises of profit before tax as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).
Six months Six months
ended ended
31 March 31 March
2020 2019
Calculation $'000 $'000
------------------------------------ ----------------- --- ---------- ----------
Profit before tax Income Statement 62,270 30,308
Transaction costs Income Statement 1,201 813
Amortisation of acquired intangible
assets Note 10 16,830 15,551
Exceptional items Note 5 (5,257) 15,164
------------------------------------ ---------------------- ---------- ----------
Adjusted profit before tax 75,044 61,836
------------------------------------------------------------ ---------- ----------
Adjusted operating margin
Definition
Measures the adjusted operating profit as a percentage of revenue.
Six months Six months
ended ended
31 March 31 March
2020 2019
Calculation $'000 $'000
-------------------------- ----------------------------- --- ----------- ----------
Adjusted operating profit Per above 81,298 65,602
Revenue Income Statement 693,590 656,639
-------------------------- ----------- ----------
Adjusted operating margin 11.7% 10.0%
-------------------------------------------------------------- ----------- ----------
Adjusted net operating margin
Definition
Measures the adjusted operating profit as a percentage of net revenue.
Six months Six months
ended ended
31 March 31 March
2020 2019
Calculation $'000 $'000
------------------------------ ---------- --- ----------- ----------
Adjusted operating profit Per above 81,298 65,602
Net revenue Per above 596,174 546,165
--------------- -----------
Adjusted net operating margin 13.6% 12.0%
----------------------------------------------- ----------- ----------
Adjusted effective tax rate
Definition
The Group adjusted effective tax rate expresses the income tax expense adjusted for the tax impact of exceptional items, transaction costs and the amortisation of acquired intangible assets as a percentage of adjusted profit before tax.
Six months Six months
ended ended
31 March 31 March
2020 2019
Calculation $'000 $'000
----------
Tax charge Income Statement 7,016 7,115
Tax relief with respect to transaction costs 118 40
Deferred tax credit with respect to acquired
intangible amortisation 4,239 3,642
Tax relief with respect to exceptional items Note 5 (41) 209
Remeasurement of current tax liabilities Note 5 4,420 -
Income tax expense before exceptional, transaction
costs and deferred tax attaching to amortisation
of acquired intangible assets 15,752 11,006
----------
Adjusted profit before tax Per above 75,044 61,836
Adjusted effective tax rate 21.0% 17.8%
Return on capital employed (ROCE)
Definition
ROCE is the adjusted operating profit expressed as a percentage of the Group's net assets employed. Net assets employed is the average of the opening and closing net assets in the period excluding net debt adjusted for the historical amortisation of acquired intangible assets and restructuring charges.
As at As at
31 March 31 March
2020 2019
Calculation $'000 $'000
------------------------------------ ----------
Net assets Balance Sheet 945,303 892,675
Net debt Note 13 58,239 56,780
------------------------------------
Assets before net debt 1,003,542 949,455
Cumulative intangible amortisation 226,527 197,173
Cumulative restructuring costs 20,632 25,714
---------------------------------------------------------
Total capital employed 1,250,701 1,172,342
---------------------------------------------------------
Average total capital employed 1,211,522 1,194,822
Rolling 12 month adjusted operating
profit 170,536 145,753
---------------------------------------------------------
Return on capital employed 14.1% 12.2%
----------
Adjusted and annualised EBITDA
Definition
Adjusted EBITDA is used internally for performance management and is also a useful supplemental measure for external stakeholders. Adjusted EBITDA is adjusted operating profit (operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items) before depreciation, share-based payment expense, amortisation of computer software, the share of joint venture profits/(loss) and profit/(loss) on disposal of property, plant and equipment.
The annualised EBITDA used for debt covenant compliance purposes, amends adjusted EBITDA to include the annualisation of the EBITDA for acquisitions and exclude share-based payment expense, transaction costs, the impact of IFRS 16 Leases on EBITDA and the EBITDA of completed disposals.
Adjusted and annualised EBITDA are adjusted for depreciation of right of use assets as the expense is considered by management to be similar in nature to depreciation of property, plant and equipment and amortisation of intangible assets. Annualised EBITDA excluding IFRS 16 is also presented (excluding depreciation of right of use assets and IFRS 16 operating profit impact) to illustrate an annualised EBITDA that is consistent with the Group's financial debt covenants.
12 months
ended
6 months 6 months 12months
ended ended ended 31 March
31 March 31 March 31 March
2020 2019 2020 2019
Calculation $'000 $'000 $'000 $'000
---------
Adjusted operating profit Per above 81,298 65,602 170,536 145,753
Share-based payment expense Cash Flow Statement 2,628 2,521 4,827 5,027
Depreciation Cash Flow Statement 11,331 11,764 22,697 24,213
Depreciation of right of use
assets Cash Flow Statement 8,128 - 8,128 -
Amortisation of computer software Note 10 4,694 3,657 9,064 7,078
Joint venture profit share Note 4 (954) 418 (1,422) (403)
Profit on disposal of property,
plant and equipment Cash Flow Statement (26) (678) 80 (744)
Adjusted EBITDA 107,099 83,284 213,910 180,924
Share-based payment expense (4,827) (5,027)
Transaction costs (2,524) (2,213)
EBITDA of completed disposals (287) (1,138)
Annualised EBITDA of acquisitions
(1) 4,059 2,026
------
Annualised EBITDA 210,331 174,572
------
IFRS 16 Operating profit impact (766) -
Depreciation of right of use
assets (8,128) -
IFRS 16 impact on EBITDA of completed
disposals (70) -
IFRS 16 impact on Annualised EBITDA
of acquisitions 105 -
------
Annualised EBITDA excluding IFRS
16 201,472 174,572
(1) Includes EBITDA for acquisitions which were not part of the Group for the full financial period.
Financial ratios
Definition
The net debt 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 and deferred consideration, see Note 7). Net debt represents the net total of current and non-current borrowings, current and non-current derivative financial instruments and cash and cash equivalents as presented in the Group Balance Sheet and is calculated in Note 13.
Constant currency
Definition
The translation of foreign denominated earnings can be impacted by movements in foreign exchange rates versus U.S. dollars, the Group's presentation currency. In order to present a better reflection of underlying performance in the period, the Group retranslates foreign denominated prior period earnings at current period exchange rates.
Six months Six months
ended 31 ended 31
March 2020 March 2019
Revenue - constant currency $'000 $'000
Revenue Income Statement 693,590 656,639
Currency impact - (4,296)
Revenue - constant currency 693,590 652,343
Revenue - constant currency increase
on H1 2019 41,247
Revenue - constant currency increase
on H1 2019 % 6%
Net revenue - constant currency $'000 $'000
Net revenue Per above 596,174 546,165
Currency impact - (3,669)
Net revenue - constant currency 596,174 542,496
Net revenue - constant currency increase
on H1 2019 53,678
Net revenue - constant currency increase
on H1 2019 % 10%
Adjusted operating profit - constant
currency $'000 $'000
Adjusted operating profit Per above 81,298 65,602
Currency impact - 129
Adjusted operating profit - constant
currency 81,298 65,731
Adjusted operating profit - constant
currency increase on 2019 15,567
Adjusted operating profit - constant
currency increase on 2019 % 24%
Adjusted profit before tax - constant
currency $'000 $'000
Adjusted profit before tax Per above 75,044 61,836
Currency impact - 240
Adjusted profit before tax - constant
currency 75,044 62,076
Adjusted profit before tax - constant currency
increase on 2019 12,968
Adjusted profit before tax - constant currency
increase on 2019 % 21%
Adjusted diluted earnings per share ('EPS')
- constant currency $'000 $'000
Adjusted profit attributable to owners
of the parent Note 8 59,283 50,826
Currency impact - 235
Adjusted profit attributable to owners
of the parent - constant currency 59,283 51,061
Weighted average number of shares used in
diluted EPS calculation Note 8 250,786,898 250,069,757
Adjusted diluted EPS - constant currency (cent) 23.64 20.42
Adjusted diluted EPS - constant currency increase
on 2019 (cent) 3.22
Adjusted diluted EPS - constant currency increase
on 2019 % 16%
The dividend per share constant currency increase on 2019 percentage disclosed is the same as actual percentage increase
in dividend per share as this is based on the disclosed US dollars dividend per share.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR DZGMKNRZGGZM
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May 19, 2020 02:00 ET (06:00 GMT)
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