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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Udg Healthcare Public Limited Company | LSE:UDG | London | Ordinary Share | IE0033024807 | ORD EUR0.05 (CDI) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1,079.00 | 1,078.00 | 1,079.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMUDG
RNS Number : 5429I
UDG Healthcare Public Limited Co.
27 November 2018
UDG Healthcare plc
Preliminary Announcement of Results
Year ended 30 September 2018
Solid performance drives 22% full-year constant currency EPS growth
27 November 2018: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its preliminary results for the year ended 30 September 2018, in which the Group continued to deliver strong EPS growth.
Financial Results
Constant Increase currency IFRS based on Increase Adjustments(1) Adjusted 2017 on 2017 $'m $'m $'m % % Continuing operations Revenue 1,315.2 - 1,315.2 8 5 Net revenue(2) 1,129.7 - 1,129.7 10 6 Operating profit 5.5 142.0 147.5 14 12 Profit before tax 8.4 130.4 138.8 17 15 Diluted earnings per share (EPS) (cent) 1.52 44.42 45.94 24 22 Dividend per share (cent) 16.00 - 16.00 20 20 ---------------------------- ------------- ----------------- ----------- ----------- ----------- 2018 2017 Net debt ($'m) 60.8 53.3 Net debt/annualised EBITDA (times) 0.34 0.32 ---------------------------- ------------- ----------------- ----------- ----------- -------------
Non-IFRS information
The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides investors with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration. Reference to these performance measurements throughout this report are to the adjusted measurements unless otherwise stated and these adjusted measurements are explained on pages 30-34.
(1) Adjusted operating profit, profit before tax and diluted EPS are stated before the amortisation of acquired intangible assets ($31.0m, pre-tax), transaction costs ($2.4m, pre-tax) and exceptional charges (operating charge $108.6m, pre-tax $97.1m and post-tax $85.8m) relating to the disposal and impairment of Aquilant ($90.7m charge), the Group's restructure of internal operating structures ($18.0m charge), deferred contingent consideration adjustments ($11.6m gain), net tax effect of these items ($1.5m gain), and an exceptional credit to deferred tax liabilities ($9.7m gain). See note 7.
(2) Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin.
Financial highlights (Continuing Group)
-- Adjusted diluted earnings per share(1) (EPS) increased by 24% (22% on a constant currency basis).
-- Net revenue growth of 10% (6% on a constant currency basis) to $1,129.7 million.
-- Adjusted operating profit(1) growth of 14% (12% on a constant currency basis) to $147.5 million. Underlying operating profit(2) grew by 7%, excluding the Future Fit programme and Aquilant.
o Ashfield's adjusted operating profit(1) increased by 16% on a constant currency basis, benefiting from acquisitions
o Sharp's adjusted operating profit(1) increased by 13% on a constant currency basis driven by very strong momentum in the US business as the year progressed.
-- Adjusted net operating margin(3) increased to 13.1% from 12.6%. -- Adjusted profit before tax(1) increased by 17% (15% on a constant currency basis).
-- Proposed 21% increase in final dividend to 11.75 $ cent per share, yielding a full year dividend increase of 20% to 16.00 $ cent per share.
-- Net debt of $60.8 million at 30 September 2018 (0.34x net debt to annualised EBITDA).
Strategic & operating highlights
-- Completed the acquisitions of Create NYC and SmartAnalyst in July 2018 for a combined consideration of up to $82.4 million.
-- Completed the disposal of Aquilant in August 2018, concluding the Group's exit from its supply chain businesses.
-- Ashfield's offering continues to shift towards more strategic, higher value services with Ashfield Communications & Advisory now accounting for 63% of Ashfield's operating profit, up from approximately 20% five years ago.
-- Three Sharp facilities upgraded in the year, providing a strengthened platform for growth.
-- Restructuring of internal operating structures completed, with a view to achieving greater flexibility, accountability and performance across the Group. An after tax restructuring charge of $14.4 million has been incurred as a consequence in 2018, with the benefits being reinvested into technology, infrastructure and a STEM aXcellerate growth programme.
Chief Executive's comment
Commenting on the performance, Chief Executive Officer, Brendan McAtamney said:
"The 2018 results reflect the continued execution of our strategy and another year of continued strong growth for the Group, with adjusted earnings per share growth of 24% (22% on a constant currency basis). Our two global platforms, Ashfield and Sharp, continued to drive earnings as we leveraged our leading market positions and sector expertise.
Ashfield Communications & Advisory, including the benefit of acquisitions, was the main driver of earnings growth supported by Sharp US, which delivered a particularly strong performance during the second half of the year. We are also pleased with the additions of Create NYC and SmartAnalyst into Ashfield as we continue to broaden the range of capabilities we offer our healthcare clients.
Looking ahead to 2019, we expect continued progress, both organically and through further strategic acquisitions. We expect good underlying profit growth in both Ashfield Communications & Advisory and Sharp, particularly in the US. In Ashfield Commercial & Clinical we will continue to diversify and differentiate our service offering, although in the short term we expect there to be some ongoing softness. As we have done in previous years we will also continue to invest in our talent, systems and infrastructure, to ensure we continue to have an effective platform for future sustainable growth."
(1) Before the amortisation of acquired intangible assets, transaction costs and exceptional items.
(2) Underlying growth is reported growth adjusted for the impact of currency translation movements and any acquisition or disposal activity.
(3) Operating margin as a percentage of net revenue. Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin.
Group development and outlook
Corporate Development
The Group continued to make good progress from a corporate development perspective completing the acquisitions of Create NYC, an innovative communications agency, and SmartAnalyst, a strategic commercialisation consulting and analytics business, in July 2018 for a total combined consideration of up to $82.4 million. Both acquisitions are a strong fit strategically, expand the Group's capabilities, and complement the underlying growth profile of the business.
The Group also completed the disposal of Aquilant to H2 Equity Partners in August 2018. Aquilant represented approximately 4% of the Group's operating profit. Following the Group's disposal of United Drug in 2016, the disposal of Aquilant is the final step in the Group's exit from its supply chain businesses.
At the year end, the Group's net debt was $60.8 million (0.34x net debt to EBITDA), leaving it well placed to fund the continued inorganic development of our two global platforms, Ashfield and Sharp.
Ashfield Development
A key element of the Group's strategy is the continued expansion and development of Ashfield's service proposition. This strategy has transformed Ashfield from a tactical provider of field-based sales reps to a strategically focused business with a broad suite of end-to-end advisory, communication, commercial and clinical services. Ashfield Communications & Advisory now accounts for 63% of Ashfield's operating profit, up from approximately 20% five years ago. The acquisitions of Create NYC and SmartAnalyst further strengthen and expand Ashfield's capabilities towards more strategic, higher value services.
STEM aXcellerate
STEM was acquired in October 2016 and since then has delivered significant growth. STEM continues to see considerable opportunities to grow its core pharmaceutical customer base and in tandem expand its unique model into other adjacent healthcare markets which offer significant growth potential. This expansion programme, known as STEM aXcellerate, will be undertaken on a phased basis. While the Group is confident that STEM aXcellerate offers the potential for attractive financial returns, this expansion will also require considerable people investment which will impact on underlying profit growth rates in 2019.
Sharp Development
2018 marks the tenth anniversary of the acquisition by the Group of Sharp Packaging US. Since 2008, consistent growth has led to a near doubling of capacity, a doubling of the workforce and a significant increase in profitability.
Building on this trajectory, in 2018, three of Sharp's facilities were refurbished providing it with an excellent platform for future growth. This included Sharp's investment in its facility in Heerenveen, Netherlands, as well as its clinical facilities which continued to progress on schedule. When completed, these investments will allow Sharp Clinical the capacity to offer end-to-end clinical services both in the US and Europe.
Future Fit
The Future Fit programme was a significant focus in 2018, with Workday fully implemented and the implementation of Oracle well progressed. The previously communicated step-up in costs has moderated underlying profit growth by approximately $3.5 million in 2018, primarily in Ashfield.
The Group continues to invest in technologies and systems to deliver market-leading services and innovative solutions for its clients. These strategic investments include front-end client facing technologies such as Health Cloud and Avature, which help differentiate our Ashfield Commercial & Clinical business in particular. We will also continue to invest in support technologies such as the Concur expense system and IT security, along with the implementation as applicable of Workday and Oracle to our acquisitions. These ongoing investments will future-proof the fabric of the organisation and provide a solid foundation for the integration of newly acquired businesses, and the long-term sustainable growth of the Group.
Restructuring and Reinvestment Programme
The Group remains ambitious to continue the strong growth and development of its business. Following the considerable expansion in recent years both organically and inorganically, and the stated intention to focus on its two global growth platforms, Ashfield and Sharp, the Group has implemented a restructuring of its internal operating structures, with a view to achieving greater flexibility, accountability and performance. Furthermore, it will assist in taking advantage of the growing market opportunities in an evolving and increasingly complex healthcare industry.
An after tax restructuring charge of $14.4 million has been incurred as a consequence in 2018. The Group will reinvest the benefits gained from the restructuring into systems, infrastructure and the STEM aXcellerate programme.
Tax
The Group had an effective tax rate for the year of 17.1% down from 22.2% in 2017. This reflects the benefit from the reduction in US federal corporate tax rates from 1 January 2018 along with the benefit of a number of other gains during the second half of the year. The Group expects an effective tax rate of approximately 18% for 2019, reflecting the full-year impact of US tax reforms.
Outlook
For 2019, we expect the 2018 trends to continue, with good underlying profit growth from Ashfield Communications & Advisory and Sharp, and weaker conditions continuing in Ashfield Commercial & Clinical. The reported growth will also be impacted by planned investments, including the STEM aXcellerate programme.
In line with previous practice, the Group will provide formal 2019 guidance in January 2019 as part of its First Quarter Trading Update.
With overall market conditions remaining favourable, the Group is well positioned to deliver sustainable future growth in line with our existing medium term underling operating profit guidance. In addition, the Group retains substantial financial flexibility to supplement that underlying growth with further strategic acquisitions.
Review of Operations
Ashfield
2018 2017 Actual Underlying $'m $'m Growth Growth(2) --------------------------------------- ------ ------ ------- ----------- Gross revenue Commercial & Clinical 597.5 604.7 (1%) (7%) Communications & Advisory 323.9 216.7 49% 8% Total gross revenue 921.4 821.4 12% (3%) Net revenue(1) Commercial & Clinical 448.2 442.3 1% (6%) Communications & Advisory 287.7 187.8 53% 10% Total net revenue 735.9 630.1 17% (1%) Operating profit Commercial & Clinical 36.3 38.6 (6%) (10%) Communications & Advisory 62.1 43.0 44% 10% Total operating profit 98.4 81.6 21% 0% Operating margin Operating margin (on gross revenue) 10.7% 9.9% Net operating margin (on net revenue) 13.4% 12.9% --------------------------------------- ------ ------ ------- -----------
(1) Net revenue represents gross revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin. There are no pass-through costs in Sharp.
(2) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
Ashfield delivered a robust financial performance during the year, driven by the benefit of acquisitions, and good underlying momentum in Communications & Advisory, offset by challenges in the Commercial & Clinical business. Net revenue was up 17% to $735.9 million and operating profit was up 21% to $98.4 million.
Ashfield's underlying net revenue and underlying operating profit were broadly flat year on year, after adjusting for the impact of currency translation movements and the contribution of acquisitions. As expected, Ashfield incurred approximately $3.5 million additional operating costs during the year related to the Future Fit investments - the business generated approximately 5% underlying operating profit growth during the year before these additional costs.
Net operating margin increased to 13.4% from 12.9% reflecting the continued strong momentum from the higher margin Communications & Advisory business.
Ashfield Communications & Advisory accounted for 63% of Ashfield's operating profit in 2018, up from 53% in 2017. Net revenue increased by 53%, 10% on an underlying basis, and operating profit increased by 44%, 10% on an underlying basis. Underlying operating profit increased by 13%, excluding the impact of additional Future Fit costs. Growth was driven by a combination of good underlying growth and the benefit of acquisitions completed in 2017 and 2018. While the Group expects these strong underlying growth dynamics to continue in 2019, reported growth will be tempered by planned investments, including STEM aXcellerate.
Ashfield Commercial & Clinical experienced a challenging year with underlying net revenues declining by 6% and underlying operating profit declining by 10% (5% decline excluding Future Fit costs). The decline was driven by a combination of factors including the timing of contract activity levels and fewer new business development opportunities during the second half of the year. As previously indicated, we expect these challenging conditions to continue in 2019. The market continues to evolve with a clear shift from the development of primary care products towards specialty care. Ashfield's diversified geographic and service mix leaves it well placed to benefit from the growth in specialty medicines and rise in the demand for more sophisticated multichannel solutions.
The outlook for Ashfield over the medium term remains positive, as the business diversifies its service offering and adds complementary capabilities to meet the evolving needs of its client base.
Sharp
2018 2017 Actual Underlying $'m $'m Growth Growth(1) ------------------------- ------ ------ ------- ----------- Revenue US 267.7 254.0 5% 5% Europe 43.4 48.1 (10%) (17%) Total revenue 311.1 302.1 3% 1% Operating profit/(loss) US 46.9 40.9 15% 15% Europe (1.1) 0.4 - - Total operating profit 45.8 41.3 11% 11% Operating margin % 14.7% 13.7% ------------------------- ------ ------ ------- -----------
(1) Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.
Sharp delivered a strong financial performance for the year, driven by improving momentum in Sharp US during the second half, offset by a lower than anticipated performance in Sharp Europe. Revenue was up 3% to $311.1 million and operating profit was up 11% to $45.8 million. Operating margins increased to 14.7% from 13.7%.
After a challenging start to 2018, Sharp US generated substantial underlying operating profit during the second half of the year to deliver underlying operating profit growth of 15% for the full year. This has been driven by growth in demand for the secondary packaging of biotech injectable products, as well as with traditional packaging formats (bottles, blister packs, etc.).
Sharp Europe generated an operating loss of $1.1 million during the year due to activity levels with some clients being lower than previously anticipated.
Sharp Clinical successfully completed phase one of its expansion project in the US by relocating to its newly renovated facility at Bethlehem. The second significant investment in Sharp Clinical was the construction and fit out of our state-of-the-art facility in Wales, UK. The site is now fully operational for packaging and logistics services with analytical, manufacturing and interactive response technology services to follow by 2020. These investments will allow Sharp Clinical to continue its clinical supply chain optimisation strategy by offering end-to-end services, formulation to logistics, all within one facility in both the US and Europe.
Based on the current activity levels and the strong pipeline of new business, Sharp remains well positioned to deliver double-digit underlying operating profit growth over the medium term.
Analyst presentation
A presentation for investors and analysts will be held at the London Stock Exchange at 8.30 GMT today, 27 November 2018. If you wish to attend, please contact Powerscourt at the details below. Alternatively, to dial into the conference call or webcast, the details are as follows:
Audio webcast
https://edge.media-server.com/m6/p/njnoc85w
Conference call
UK number: +44-330-336-9105
Ireland number: + 353-1-246-5638
US number: +1-929-477-0448
Participant code: 7295026
If you wish to ask questions, please do so via the conference call.
A replay of the audio webcast can be accessed via the same webcast link above.
For further information, please contact: Investors and Analysts: 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 over 8,500 people with operations in 26 countries and delivering services in over 50 countries.
UDG Healthcare plc operates across two divisions: Ashfield and Sharp.
Ashfield is a global leader in advisory, communication, commercial and clinical services for the pharmaceutical and healthcare industries. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.
Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and healthcare 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
This announcement contains certain forward-looking statements, beliefs or opinions, including statements with respect to the Company's business, financial condition and results of operations. By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. These statements reflect the reasonable beliefs and expectations of the Company, are made in good faith and are based on the information available to the Company at the date of this announcement. However, a number of factors, including known and unknown risks, uncertainties and other factors, which are in some cases beyond the Company's control, could cause actual results and developments to differ materially from those expressed or implied by the forward looking statements.
Finance Review
for the year ended 30 September 2018
Revenue
Revenue of $1,315.2 million for the year was 8% ahead of 2017 (5% on a constant currency basis). Ashfield increased revenue by 12% and Sharp increased revenue by 3%. Group underlying revenue declined by 2%, excluding the impact of foreign exchange, acquisitions and disposals.
Adjusted operating profit
Adjusted operating profit of $147.5m was 14% ahead (12% on a constant current basis) of 2017.
Adjusted net operating margin
The adjusted net operating margin for the year of 13.1% was an increase on the 12.6% margin reported in 2017. The positive margin effect of acquisitions and higher revenue growth in the higher margin businesses more than offset the impact of additional Future Fit operating costs.
Adjusted profit before tax
Net interest costs, pre-exceptional items, for the year of $8.7 million are 16% lower than 2017, which is as a result of the repayment of guaranteed senior unsecured notes in September 2017. This delivered an adjusted profit before tax of $138.8 million which is 17% ahead of 2017 (15% on a constant currency basis).
Taxation
The effective taxation rate has decreased from 22.2% in 2017 to 17.1% in 2018 following the enactment of the US Tax Cuts and Jobs Act, along with the benefit of a number of other gains during the second half of the year.
Adjusted diluted earnings per share
Adjusted earnings per share (EPS) is 24% ahead (22% on a constant currency basis) of 2017 at 45.94 $ cent. Underlying EPS increased by 11% excluding the benefit of acquisitions completed in 2017 and during the year and favourable currency movements.
Exceptional items
The Group incurred an exceptional charge of $85.8 million after tax for the year.
A goodwill impairment charge of $57.6 million was recognised in the six month period to 31 March 2018 in relation to Aquilant, partially offset by an exceptional gain of $8.9 million relating to the exit of two Aquilant clients in the year. A tax charge of $1.0 million was incurred in relation to these items. On 8 August 2018 the Group completed the disposal of Aquilant which resulted in a loss on disposal of $41.9 million.
A charge of $18.0 million was incurred in relation to restructuring costs. The charge primarily relates to redundancy and onerous lease costs incurred as part of the restructuring of the Group's internal operating structures. A tax credit of $3.6 million was incurred in relation to these items.
Following the enactment of the US Tax Cuts and Jobs Act, the Group recognised an exceptional tax gain of $9.7 million in the income statement arising on the one-off remeasurement of certain US tax liabilities.
Deferred contingent consideration of $11.6 million in respect of Cambridge BioMarketing, MicroMass Communications and Sellxpert was released in the year following review of expected performance against earn-out targets. A tax charge of $1.0 million was incurred in relation to these items.
Disposal of Aquilant
On 8 August 2018 the Group completed the disposal of Aquilant which resulted in a loss on disposal of $41.9 million. The total proceeds receivable by the Group are expected to be $23.0 million and related costs of disposals were $1.7 million. In line with the Group's strategy, proceeds from the transaction will be used to fund the continued development of the Group's higher growth and higher margin Ashfield and Sharp businesses.
Aquilant contributed $82.7 million of revenue (full year 2017 $96.3 million) and $3.3 million of operating profit (full year 2017 $6.4 million) to the Group for the year.
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 US dollar for Group reporting purposes. The re-translation of overseas profits to US dollar has increased constant currency EPS growth of 22% to a reported EPS growth rate of 24%, which is primarily due to the strength in Sterling in 2018 versus 2017.
The average 2018 exchange rates were $1: GBP0.7436 and $1: EUR0.8403 (2017 $1:GBP0.7891 and $1:EUR0.9047).
Cash flow
The following table displays cash flow information for the years ended 30 September 2018 and 2017:
2018 2017 $'000 $'000 -------------------------------------------------------------- --------- ---------- Net cash inflow from operating activities 102,516 107,778 Net cash outflow from investing activities (76,323) (262,864) Net cash outflow from financing activities (33,063) (91,373) -------------------------------------------------------------- --------- ---------- Net change in cash and cash equivalents (6,870) (246,459) Effect of exchange rate changes on cash and cash equivalents (500) 5,199 Cash and cash equivalents at beginning of year 187,469 428,729 Cash and cash equivalents end of year 180,099 187,469 -------------------------------------------------------------- --------- ----------
Net cash inflow from operating activities
The net cash inflow from operating activities was $102.5 million (2017: $107.8 million).
2018 2017 $'000 $'000 ------------------------------------------- --------- --------- Adjusted EBITDA 181,790 156,886 Interest paid (9,682) (10,608) Income taxes paid (18,107) (14,522) Working capital increase (50,350) (19,269) Other cash outflows (1,135) (4,709) ------------------------------------------- --------- --------- Net cash inflow from operating activities 102,516 107,778 ------------------------------------------- --------- ---------
Working capital increased by $50.4 million (2017: $19.3 million). The increase in working capital was due to the growth in the business, the reversal of favourable timing inflows during 2017, and temporary cashflow delays arising from the implementation of Oracle under the Future Fit programme. Other cash outflows of $1.1 million relates to transaction costs paid of $5.3 million partially offset by an exceptional items inflow of $4.2 million. This consisted of an $8.9 million inflow relating to Aquilant receipts from agency terminations, offset by a $4.6 million outflow relating to the Group's restructuring.
Net cash outflow from investing activities
Net cash outflow from investing activities was $76.3 million, compared to $262.9 million in 2017. This decrease was principally due to reduced outflows on acquisitions. During 2018, $39.6 million was invested in property, plant and equipment. This included investment in Sharp's facilities, in particular the investments in Sharp Clinical's sites in the US and UK, and its commercial packaging facility in the Netherlands. Computer software outflows of $21.0 million included investments in Future Fit, which will enable our businesses to grow in an efficient manner. The Group invested $33.5 million on the acquisition of subsidiaries, which represented the initial consideration for the acquisitions of Create NYC and SmartAnalyst, while additionally $5.9 million was paid in deferred contingent consideration associated with prior year acquisitions. Offsetting these outflows, a net cash inflow of $21.0 million was received on the disposal of Aquilant.
Net cash outflow from financing activities
Net cash outflow from financing activities decreased by $58.3 million to $33.1 million, from $91.4 million in 2017, principally due to the repayment of guaranteed senior unsecured notes in September 2017. During 2018, dividend payments of $34.7 million were made relating to the final 2017 dividend and the 2018 interim dividend.
Balance sheet
Net debt at the end of the year was $60.8 million ($180.1 million cash and $240.9 million debt). The net debt to annualised EBITDA ratio is 0.34 times debt (2017: 0.32 times debt) and net interest is covered 22.0 times (2017: 16.3 times) by annualised EBITDA. Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.
The Group has retained its long-term private placement debt as it expects to make acquisitions and other capital investments in the coming years. At 30 September 2018, the Group also had $255.7 million of undrawn overdraft and loan facilities.
Return on capital employed (ROCE)
The Group's ROCE was 12.7%, compared to 12.8% in 2017. Details on how this was calculated are on page 33.
Dividends
The directors are proposing a final dividend of 11.75 $ cent per share representing an increase of 21% on the 2017 final dividend of 9.72 $ cent per share. This represents 20% growth in the total dividend for the year to 16.00 $ cent per share. This continues the Group's 30 year history of consistently increasing dividends.
Subject to shareholder approval at the Company's Annual General Meeting, the proposed final dividend of 11.75 $ cent per share will be paid on 4 February 2019 to ordinary shareholders on the Company's register at 5.00 p.m. on 11 January 2019.
Investor relations
UDG Healthcare's executive management team spend a significant amount of time meeting with shareholders and the international financial community. We have invested in dedicated investor relations resources and are focused on increasing the awareness of the Company among the investor and analyst community.
The Group maintains continuous engagement with its shareholders during the year (apart from when the Group is in a close period), specifically following the release of our interim and preliminary results, and at the time of major developments including M&A transactions. The Group continues to ensure that a broad geographic base of institutional investors is reached through participation in roadshows, attendance at conferences and investor events. During 2018, the UDG Healthcare senior management team conducted over 220 institutional investor one-on-one meetings and participated at twelve investor conferences, including five in the US.
Additionally, the Group hosted a successful two day Capital Markets event at its US facilities in Fort Washington, PA (Ashfield) and Allentown, PA (Sharp) in February 2018. In addition to various presentations during the event, attendees were given tours of the facilities and met with the wider Ashfield and Sharp senior management teams. The event was attended by the Group's CEO, CFO and Chairman.
The number of independent equity analysts covering the Group increased to thirteen during the year (from ten) reflecting the continued growing interest in UDG Healthcare from the equity markets.
The Board of Directors considers it important to understand the views of shareholders and receive regular updates on investor perceptions.
Our website www.udghealthcare.com, is the primary method of communication for the majority of our shareholders. We publish our annual report, preliminary results and other public announcements on our website. In addition, details of our conference calls and presentations are available through our website.
Our investor relations department provides a point of contact for shareholders and full contact details are set out in the investor relations section of our website. Shareholders can also submit an information request through the shareholder services section of our website.
Group Income Statement
for the year ended 30 September 2018
Year ended 30 September 2018 Exceptional items Total Pre-exceptional items (Note 7) 30 September 2018 Year ended 30 September 2017 Notes $'000 $'000 $'000 $'000 Revenue 3 1,315,186 - 1,315,186 1,219,755 Cost of sales (927,877) (5,706) (933,583) (871,909) ----------------- ------ ---------------------- ------------------ ------------------- ----------------------------- Gross profit 387,309 (5,706) 381,603 347,846 Selling and distribution expenses (217,475) (11,042) (228,517) (192,536) Administration expenses (17,250) (1,214) (18,464) (23,313) Other operating expenses (37,037) (99,550) (136,587) (25,450) Other operating income - 8,882 8,882 - Transaction costs (2,374) - (2,374) (4,028) Share of joint ventures' profit after tax 4 958 - 958 667 ----------------- ------ ---------------------- ------------------ ------------------- ----------------------------- Operating profit 114,131 (108,630) 5,501 103,186 Finance income 5 5,235 11,576 16,811 18,905 Finance expense 5 (13,926) - (13,926) (29,257) ----------------- ------ ---------------------- ------------------ ------------------- ----------------------------- Profit before tax 105,440 (97,054) 8,386 92,834 Income tax expense (15,792) 11,263 (4,529) (20,976) ----------------- ------ ---------------------- ------------------ ------------------- ----------------------------- Profit for the financial year 89,648 (85,791) 3,857 71,858 ----------------- ------ ---------------------- ------------------ ------------------- ----------------------------- Profit attributable to: Owners of the parent 89,586 (85,791) 3,795 71,858 Non-controlling interest 62 - 62 - ----------------- ------ ---------------------- ------------------ ------------------- -----------------------------
89,648 (85,791) 3,857 71,858 ----------------- ------ ---------------------- ------------------ ------------------- ----------------------------- Earnings per ordinary share: Basic earnings per share - cent 8 1.53c 28.97c Diluted earnings per share - cent 8 1.52c 28.83c
Group Statement of Comprehensive Income
for the year ended 30 September 2018
2018 2017 Notes $'000 $'000 Profit for the financial year 3,857 71,858 Other comprehensive income/(expense): Items that will not be reclassified to profit or loss: Remeasurement gain on Group defined benefit schemes 15 2,422 11,098 Deferred tax on Group defined benefit schemes - Pre-exceptional item (187) (599) - Exceptional item 408 - -------- --------- 221 (599) 2,643 10,499 --------------------------------------------- ------ -------- -------- --------- ------- Items that may be reclassified subsequently to profit or loss: Foreign currency translation adjustment 12 (5,466) 10,109 Reclassification on loss of control of subsidiary undertakings 12 33,383 - Group cash flow hedges: - Effective portion of cash flow hedges - movement into reserve (433) (15,271) - Effective portion of cash flow hedges - movement out of reserve (3,032) 14,865 -------- --------- Effective portion of cash flow hedges 12 (3,465) (406) - Movement in deferred tax - movement into reserve 54 1,909 - Movement in deferred tax - movement out of reserve 379 (1,858) -------- --------- Net movement in deferred tax 12 433 51 --------------------------------------------- ------ -------- -------- --------- ------- 24,885 9,754 --------------------------------------------- ------ -------- -------- --------- ------- Total other comprehensive income 27,528 20,253 --------------------------------------------- ------ -------- -------- --------- ------- Total comprehensive income for the financial year 31,385 92,111 --------------------------------------------- ------ -------- -------- --------- ------- Total comprehensive income attributable to: Owners of the parent 31,323 92,111 Non-controlling interests 62 - --------------------------------------------- ------ -------- -------- --------- ------- 31,385 92,111 --------------------------------------------- ------ -------- -------- --------- -------
Group Statement of Changes in Equity
for the year ended 30 September 2018
Equity Other Attributable share Share Retained reserves to owners of Non-controlling Total capital premium earnings (Note 12) the parent interest equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2017 14,620 196,496 836,087 (166,656) 880,547 109 880,656 Profit for the financial year - - 3,795 - 3,795 62 3,857 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - (3,465) (3,465) - (3,465) Deferred tax on cash flow hedges - - - 433 433 - 433 Translation adjustment - - - (5,466) (5,466) - (5,466) Reclassification on loss of control of subsidiary undertakings - - - 33,383 33,383 - 33,383 Remeasurement gain on defined benefit schemes - - 2,422 - 2,422 - 2,422 Deferred tax on defined benefit schemes - - 221 - 221 - 221 Total comprehensive income for the year - - 6,438 24,885 31,323 62 31,385 Transactions with shareholders: New shares issued 23 1,341 - - 1,364 - 1,364 Share-based payment expense - - - 6,643 6,643 - 6,643 Dividends paid to equity holders - - (34,705) - (34,705) - (34,705) Release from share-based payment reserve - - 827 (827) - - - At 30 September 2018 14,643 197,837 808,647 (135,955) 885,172 171 885,343 ------------------- ---------- ----------- ---------- ---------- ------------- ---------------- -----------
for the year ended 30 September 2017
Equity Other Attributable to share Share Retained reserves owners of the Non-controlling Total capital premium earnings (Note 12) parent interest equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2016 14,535 187,355 784,432 (179,446) 806,876 - 806,876 Profit for the financial year - - 71,858 - 71,858 - 71,858 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - (406) (406) - (406) Deferred tax on cash flow hedges - - - 51 51 - 51 Translation adjustment - - - 10,109 10,109 - 10,109 Remeasurement gain on defined benefit schemes - - 11,098 - 11,098 - 11,098 Deferred tax on defined benefit schemes - - (599) - (599) - (599) Total comprehensive income for the year - - 82,357 9,754 92,111 - 92,111 Transactions with shareholders: New shares issued 46 3,129 - - 3,175 - 3,175 Issued in business combination 39 6,012 - - 6,051 - 6,051 Share-based payment expense - - - 3,613 3,613 - 3,613 Dividends paid to equity holders - - (31,279) - (31,279) - (31,279) Release from share-based payment reserve - - 577 (577) - - - Non-controlling interest arising on acquisition - - - - - 109 109 At 30 September 2017 14,620 196,496 836,087 (166,656) 880,547 109 880,656 ------------------- --------- -------- --------- ---------- ----------------- ---------------- ----------
Group Balance Sheet
as at 30 September 2018
2018 2017 Note $'000 $'000 ASSETS Non-current Property, plant and equipment 9 179,593 168,403 Goodwill 10 515,954 542,554 Intangible assets 10 241,538 227,617 Investment in joint ventures and associates 10 9,729 8,838 Derivative financial instruments 11 330 1,302 Deferred income tax assets 5,272 4,025 Employee benefits 15 12,935 12,379 Total non-current assets 965,351 965,118 --------------------------------------------- ------ ---------- --------------- Current Inventories 31,248 55,060 Trade and other receivables 347,192 307,388 Cash and cash equivalents 11 180,099 187,469 Current income tax assets 793 2,464 Derivative financial instruments 11 2,474 2,450 Total current assets 561,806 554,831 --------------------------------------------- ------ ---------- --------------- Total assets 1,527,157 1,519,949 --------------------------------------------- ------ ---------- --------------- EQUITY Equity share capital 14,643 14,620 Share premium 197,837 196,496 Other reserves 12 (135,955) (166,656) Retained earnings 808,647 836,087 --------------------------------------------- ------ ---------- --------------- Equity attributable to owners of the parent 885,172 880,547 Non-controlling interest 171 109 Total equity 885,343 880,656 --------------------------------------------- ------ ---------- --------------- LIABILITIES Non-current Interest-bearing loans and borrowings 11 243,099 244,077 Other payables 5,451 - Provisions 13 68,900 58,470 Employee benefits 15 - 3,162 Deferred income tax liabilities 45,225 54,279 Derivative financial instruments 11 319 352 Total non-current liabilities 362,994 360,340 --------------------------------------------- ------ ---------- --------------- Current Interest-bearing loans and borrowings 11 272 58 Trade and other payables 225,526 248,145 Current income tax liabilities 13,477 16,845 Provisions 13 39,545 13,905 Total current liabilities 278,820 278,953 --------------------------------------------- ------ ---------- --------------- Total liabilities 641,814 639,293 --------------------------------------------- ------ ---------- --------------- Total equity and liabilities 1,527,157 1,519,949 --------------------------------------------- ------ ---------- ---------------
Group Cash Flow Statement
for the year ended 30 September 2018
2018 2017 $'000 $'000 Cash flow from operating activities Profit before tax 8,386 92,834 Finance income (5,235) (18,905) Finance expense 13,926 29,257 Exceptional items 97,054 - --------------------------------------------------------------------------------------- ---------- ---------- Operating profit 114,131 103,186 Share of joint ventures' profit after tax (958) (667) Transaction costs 2,374 4,028 Depreciation charge 24,477 21,221 (Profit)/loss on disposal of property, plant and equipment (340) 55 Amortisation of intangible assets 37,037 25,450 Share-based payment expense 5,069 3,613 Decrease in inventories 4,529 1,893 Increase in trade and other receivables (53,361) (24,612) (Decrease)/increase in trade payables, provisions and other payables (1,518) 3,450 Exceptional items received/(paid) 4,228 (165) Transaction costs paid (5,363) (4,544) Cash generated from operations 130,305 132,908 Interest paid (9,682) (10,608) Income taxes paid (18,107) (14,522) Net cash inflow from operating activities 102,516 107,778 --------------------------------------------------------------------------------------- ---------- ---------- Cash flows from investing activities Interest received 1,662 1,044 Purchase of property, plant and equipment (39,580) (29,466) Proceeds from disposal of property, plant and equipment 986 146 Investment in intangible assets - computer software (21,047) (21,884) Acquisitions of subsidiaries (net of cash and cash equivalents acquired) (33,479) (198,439) Deferred contingent consideration paid (5,911) (14,265) Disposal of subsidiary undertakings (net of cash and cash equivalents disposed) 21,046 - --------------------------------------------------------------------------------------- ---------- ---------- Net cash outflow from investing activities (76,323) (262,864) --------------------------------------------------------------------------------------- ---------- ---------- Cash flows from financing activities Proceeds from issue of shares (including share premium thereon) 1,364 3,175 Repayments of interest-bearing loans and borrowings (2,118) (63,266) Proceeds from interest-bearing loans and borrowings 2,507 - Repayments of finance leases (111) (3) Dividends paid to equity holders of the Company (34,705) (31,279) --------------------------------------------------------------------------------------- ---------- ---------- Net cash outflow from financing activities (33,063) (91,373) --------------------------------------------------------------------------------------- ---------- ---------- Net decrease in cash and cash equivalents (6,870) (246,459) Translation adjustment (500) 5,199 Cash and cash equivalents at beginning of year 187,469 428,729 --------------------------------------------------------------------------------------- ---------- ---------- Cash and cash equivalents at end of year 180,099 187,469 --------------------------------------------------------------------------------------- ---------- ---------- Cash and cash equivalents is comprised of: Cash at bank and short term deposits 180,099 187,469 --------------------------------------------------------------------------------------- ---------- ----------
Notes to the Preliminary Announcement
for the year ended 30 September 2018
1. Reporting entity
UDG Healthcare plc (the 'Company') and its subsidiaries (together the 'Group') delivers advisory, communications, commercial, clinical and packaging services to the healthcare industry. The Company is a public limited company whose shares are publicly traded. It is incorporated and domiciled in Ireland. The address of its registered office is 20 Riverwalk, Citywest Business Campus, Citywest, Dublin 24, Ireland. The preliminary consolidated financial information for the year ended 30 September 2018 is for the Company, its subsidiaries and the Group's interest in joint ventures and associates.
2. Basis of preparation and accounting policies
This announcement has been prepared on the basis of the results and financial position that the directors expect will be reflected in the audited statutory accounts when these are completed. The financial information presented in this report has been prepared in accordance with the Group's accounting policies under International Financial Reporting Standards ('IFRS') issued by the International Accounting Standards Board ('IASB') as adopted by the European Union ('EU'); and those parts of the Companies Act 2014 applicable to companies reporting under IFRS. Full details of the accounting policies adopted by the Group are contained in the consolidated financial statements included in the Group's 2017 Annual Report, which is available on the Group's website; www.udghealthcare.com.
The accounting policies adopted are consistent with those of the previous year. There are no new IFRS standards or amendments effective from 1 October 2017 which had a material effect on the financial information included in this report. A number of new accounting standards will become effective for the Group in future periods. These will be outlined in the consolidated financial statements contained in the Group's Annual Report for the year ended 30 September 2018.
The financial information presented herein does not represent full 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 2017 have been annexed to the annual return and filed with the Irish Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis. The statutory financial statements for the year ended 30 September 2018 will be annexed to the next annual return of the Company and filed with the Registrar of Companies.
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.
Aquilant - During the year, the Group disposed of Aquilant (Note 6). Aquilant is a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands.
The segmental analysis of the business corresponds with the Group's organisational structure and the Group's internal reporting for the purpose of managing the business and assessing performance as reviewed by the Group's Chief Operating Decision Maker (CODM), which the Group has defined as Brendan McAtamney (Chief Executive Officer). The amount of revenue and operating profit by segment is as follows:
2018 2017 $'000 $'000 Revenue Ashfield 921,406 821,412 Sharp 311,073 302,076 Aquilant 82,707 96,267 ---------------------------------------------------------------------------------------------- ---------- ---------- 1,315,186 1,219,755 ---------------------------------------------------------------------------------------------- ---------- ---------- Operating profit before amortisation of acquired intangibles, transaction costs and exceptional items Ashfield 98,451 81,567 Sharp 45,775 41,304 Aquilant 3,280 6,409 ---------------------------------------------------------------------------------------------- ---------- ---------- Adjusted operating profit 147,506 129,280 Amortisation of acquired intangibles (31,001) (22,066) Transaction costs (2,374) (4,028) Exceptional items (108,630) - ---------------------------------------------------------------------------------------------- ---------- ---------- Operating profit 5,501 103,186 Finance income 16,811 18,905 Finance expense (13,926) (29,257) ---------------------------------------------------------------------------------------------- ---------- ---------- Profit before tax 8,386 92,834 Income tax expense (4,529) (20,976) ---------------------------------------------------------------------------------------------- ---------- ---------- Profit after tax for the year 3,857 71,858 ---------------------------------------------------------------------------------------------- ---------- ---------- Geographical analysis of revenue 2018 2017 $'000 $'000 Republic of Ireland 38,724 42,178 United Kingdom 305,677 318,934 North America 715,792 629,001 Rest of World 254,993 229,642 ---------------------------------- ---------- ---------- 1,315,186 1,219,755 ---------------------------------- ---------- ----------
4. Share of joint ventures' profit after tax
2018 2017 $'000 $'000 Revenue 66,271 61,883 Expenses, inclusive of tax (64,355) (60,549) ----------------------------------- --------- --------- Profit after tax 1,916 1,334 Group's equity interest 49.99% 49.99% ----------------------------------- --------- --------- Group's share of profit after tax 958 667 ----------------------------------- --------- ---------
5. Finance income and expense
2018 2017 $'000 $'000 Finance income Income arising from cash deposits 1,763 1,057 Fair value adjustment to guaranteed senior unsecured loan notes 213 2,840 Foreign currency gain on retranslation of guaranteed senior unsecured loan notes 3,032 14,865 Ineffective portion of cash flow hedges - 76 Net finance income on defined benefit pensions 227 67 5,235 18,905 ---------------------------------------------------------------------------------- --------- --------- Finance expense Interest on overdrafts (95) (46) Interest on bank loans and other loans: -wholly repayable within 5 years (7,510) (5,482)
-wholly repayable after 5 years (1,997) (5,641) Interest on finance leases (3) (3) Unwinding of discount on provisions (840) (380) Fair value adjustments to fair value hedges (213) (2,840) Fair value of cash flow hedges transferred to equity (3,032) (14,865) Ineffective portion of cash flow hedges (236) - (13,926) (29,257) ---------------------------------------------------------------------------------- --------- --------- Net finance expense, pre-exceptional items (8,691) (10,352) Finance income relating to exceptional items 11,576 - ---------------------------------------------------------------------------------- --------- --------- Net finance income/(expense) 2,885 (10,352) ---------------------------------------------------------------------------------- --------- ---------
6. Disposal of subsidiaries
On 8 August 2018 the Group completed the disposal of Aquilant. The following tables summarise the consideration received, loss on disposal and the net cash flow arising on the disposal:
2018 $'000 Consideration Cash consideration received 22,389 Deferred consideration 580 ------------------------------------------------------------------- ---------- Total consideration received 22,969 ------------------------------------------------------------------- ---------- Assets and liabilities disposed of Property, plant and equipment 3,871 Goodwill 7,703 Deferred tax assets 333 Inventories 18,923 Trade and other receivables 16,266 Trade and other payables (18,634) Cash and cash equivalents 1,343 ------------------------------------------------------------------- ---------- Net assets disposed of 29,805 ------------------------------------------------------------------- ---------- Loss on disposal Total consideration received 22,969 Net assets disposed of (29,805) Recycling of foreign currency translation reserve on disposal (33,383) Disposal costs (1,683) ------------------------------------------------------------------- ---------- Net loss on disposal of subsidiaries (41,902) ------------------------------------------------------------------- ---------- Net cash flow from disposal of subsidiaries Cash and cash equivalents received 22,389 Cash and cash equivalents disposed of (1,343) ------------------------------------------------------------------- ---------- Net cash inflow from disposal of subsidiaries 21,046 ------------------------------------------------------------------- ---------- The cash inflow from disposal of subsidiaries is presented within cash flows from investing activities in the Group Cash flow Statement. The net loss on disposal is presented as an exceptional item (Note 7) within other operating expenses. The net loss on disposal includes the recycling of the foreign currency translation reserve of $33,383,000. This is the cumulative foreign translation difference arising from the translation of the net assets of Aquilant denominated in Euro and Sterling to US dollars in each reporting period. As these exchange differences were previously recognised in the Group's other comprehensive income and the foreign exchange reserve, this charge has a nil impact on shareholder's equity and the Group's adjusted diluted EPS. An impairment charge of $57,648,000 on the carrying value of goodwill in relation to Aquilant arose in the six month period to 31 March 2018 as previously disclosed in the 2018 interim results. This is presented as an exceptional item in Note 7. ---------------------------------------------------------------------------------
7. Exceptional items
Exceptional items are those which, in management's judgement, should be disclosed separately by virtue of their nature or amount. These exceptional items are separately presented in the Income Statement caption to which they relate. An analysis of exceptional items is disclosed below.
2018 $'000 Contract terminations (a) (8,882) Impairment of goodwill (b) 57,648 Loss on disposal of subsidiary (c) 41,902 Restructuring costs and other (d) 14,536 Onerous lease (e) 2,924 Impairment of property, plant and equipment (f) 502 --------------------------------------------- ----- --------- Net operating exceptional items 108,630 Deferred contingent consideration (g) (11,576) Net exceptional items before taxation 97,054 Exceptional items tax credit (1,548) Deferred tax (h) (9,715) --------------------------------------------- ----- --------- Net exceptional items after taxation 85,791 ---------------------------------------------------- ---------
(a) Contract termination
On 22 December 2017, Aquilant exited the VSI contract for a consideration of $10,135,000 in respect of the contract termination to include certain assets of the trade including stock. On 29 March 2018, Aquilant exited the Link contract and received consideration of $4,930,000 in respect of the contract termination to include certain assets of the trade. Exiting these contracts included the transfer of stock and other assets of $5,658,000 and resulted in restructuring costs of $525,000, primarily relating to redundancy costs. The total exceptional cash inflow net of costs and net of stock transferred in the year was $8,865,000 and the expected total net cash inflow is $9,021,000. A tax charge of $1,010,000 was incurred in relation to these items.
(b) Impairment of goodwill
A goodwill impairment charge of $57,648,000 arose during the six month period to 31 March 2018, as the Group wrote down the carrying value of goodwill in relation to Aquilant. This impairment resulted from the loss of contracts in the period, and an anticipated reduction in future earnings and resultant cashflows from the lower base. Aquilant was subsequently disposed of on 8 August 2018, see note 6 for further details.
(c) Loss on disposal of subsidiary
On 8 August 2018 the Group announced the disposal of Aquilant and incurred a loss on disposal of $41,902,000 which is detailed in note 6.
(d) Restructuring costs and other
During the year, the Group implemented a restructuring of its internal operating structures in Ashfield and Sharp, with a view to achieving greater flexibility, accountability and performance. Restructuring costs and other includes redundancy costs of $12,623,000 and accelerated share-based payment expense of $1,574,000. The balance of $339,000 relates to other costs associated with the restructuring.
(e) Onerous lease
Onerous lease costs were incurred in relation to the exit of leased properties as a consequence of the organisation restructuring during the year.
(f) Impairment of property, plant and equipment
Impairment of property, plant and equipment arose due to the exit of properties as a result of the realignment of the Group's structure.
(g) Deferred contingent consideration
Deferred contingent consideration relates to $3,469,000 in respect of Cambridge BioMarketing, $5,250,000 in respect of MicroMass Communications and $2,857,000 in respect of Sellxpert. These amounts were released in the year following a review of expected performance against earn-out targets. A deferred tax charge of $1,005,000 arose as a result of the release of contingent consideration presented within exceptional item tax line.
(h) Deferred tax
The exceptional credit to the income statement of $9,715,000 reflects the one-off benefit of a reduction in the Group's deferred tax liabilities following the enactment of the US Tax Cuts and Jobs Act. A credit of $408,000 also arises in the statement of comprehensive income as a further consequence of this legislation.
The following table provides a reconciliation of the exceptional costs to the Group Income Statement:
Selling and Other Other Total Cost of distribution Administration operating operating Finance exceptional sales expenses expenses expenses income income items $'000 $'000 $'000 $'000 $'000 $'000 $'000 Contract terminations - - - - (8,882) (8,882) Impairment of goodwill - - - 57,648 - - 57,648 Loss on disposal of subsidiary - - - 41,902 - - 41,902 Restructuring costs and other 3,366 9,956 1,214 - - - 14,536 Onerous lease 1,990 934 - - - - 2,924 Impairment of property, plant and equipment 350 152 - - - - 502 Deferred contingent consideration - - - - - (11,576) (11,576) --------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------ Net exceptional items before taxation 5,706 11,042 1,214 99,550 (8,882) (11,576) 97,054 --------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------ Exceptional items tax credit (1,548) Deferred tax (9,715) --------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------ Net exceptional items after taxation 85,791 --------------- ------------ ------------- ---------------- ------------ ------------ ------------ ------------
8. Earnings per ordinary share
Total Total 2018 2017 $'000 $'000 Profit attributable to the owners of the parent 3,795 71,858 Adjustment for amortisation of acquired intangible assets (net of tax) 23,287 16,996 Adjustment for transaction costs (net of tax) 2,194 3,658 Adjustment for exceptional items (net of tax) 85,791 - Adjusted profit attributable to owners of the parent 115,067 92,512 ------------------------------------------------------------------------ ---------- --------- 2018 2017 Number Number of shares of shares Weighted average number of shares 248,517,745 248,001,114 Number of dilutive shares under option 1,947,043 1,238,273 ------------------------------------------------------------ ------------ ------------ Weighted average number of shares, including share options 250,464,788 249,239,387 ------------------------------------------------------------ ------------ ------------ 2018 2017 Basic earnings per share - $ cent 1.53 28.97 Diluted earnings per share - $ cent 1.52 28.83 Adjusted basic earnings per share - $ cent(1) 46.30 37.30 Adjusted diluted earnings per share - $ cent(1) 45.94 37.12
(1) Adjusted profit attributable to equity holders of the parent from continuing operations is stated before the amortisation of acquired intangible assets ($23.3m, net of tax), transaction costs ($2.2m, net of tax), loss on disposal of Aquilant ($41.9m) and other exceptional items ($43.9m, net of tax).
Non-GAAP information
The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-GAAP measurements 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. 1,357,684 (2017: 2,567,081) anti-dilutive share options have been excluded from the calculation of diluted earnings per share.
The average market value of the Company's shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the year.
9. Property, plant and equipment
Land and Plant and Computer Assets under 2018 buildings equipment Motor vehicles equipment construction Total $'000 $'000 $'000 $'000 $'000 $'000 Year ended 30 September 2018 Opening net book amount 76,463 80,564 271 10,014 1,091 168,403 Additions in the year 3,637 17,016 6 1,962 19,849 42,470 Arising on acquisition - 70 - 108 - 178 Depreciation (5,412) (13,727) (45) (5,293) - (24,477) Impairment (502) (188) - - - (690) Disposals in year (355) (4,033) (24) (668) - (5,080) Reclassifications (1,778) 2,521 (55) 55 (743) - Translation adjustment (522) (549) (1) (139) - (1,211) At 30 September 2018 71,531 81,674 152 6,039 20,197 179,593 ------------------- ---------------- --------------- --------------- ---------------- --------------- ---------- At 30 September 2018 Cost or deemed cost 104,783 160,280 331 25,332 20,197 310,923 Accumulated depreciation (33,252) (78,606) (179) (19,293) - (131,330) ------------------- ---------------- --------------- --------------- ---------------- --------------- ---------- Net book amount 71,531 81,674 152 6,039 20,197 179,593 ------------------- ---------------- --------------- --------------- ---------------- --------------- ----------
10. Movement in goodwill, intangible assets and investment in joint ventures and associates
Investment in joint ventures and Intangible associates Goodwill assets $'000 $'000 $'000 Balance at 1 October 2017 542,554 227,617 8,838 Investment in computer software - 21,047 - Amortisation of acquired intangible assets - (31,001) - Amortisation of computer software - (6,036) - Impairment charge (57,648) - - Disposals in year (7,703) - - Arising on acquisitions - computer software - 9 - Arising on acquisitions 42,041 32,772 - Share of joint ventures' profit after tax - - 958
Translation adjustment (3,290) (2,870) (67) -------------------------------------------- ----------- ------------- ---------------------------------------- At 30 September 2018 515,954 241,538 9,729 -------------------------------------------- ----------- ------------- ----------------------------------------
11. Net debt
2018 2017 $'000 $'000 Current assets Cash and cash equivalents 180,099 187,469 Derivative financial instruments 2,474 2,450 Non-current assets Derivative financial instruments 330 1,302 Current liabilities Interest bearing loans (227) 72 Finance leases (45) (130) Non-current liabilities Interest bearing loans (243,091) (244,043) Finance leases (8) (34) Derivative financial instruments (319) (352) ----------------------------------- ---------- ---------- Net debt at 30 September (60,787) (53,266) ----------------------------------- ---------- ----------
12. Other reserves
Cash flow Share-based Capital hedge payment Foreign Treasury redemption exchange shares reserve Total $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2017 (12,854) 8,992 (155,465) (7,676) 347 (166,656) Effective portion of cash flow hedges (3,465) - - - - (3,465) Deferred tax on cash flow hedges 433 - - - - 433 Share-based payment expense - 6,643 - - - 6,643 Release from share-based payment reserve - (827) - - - (827) Translation adjustment - - (5,466) - - (5,466) Reclassification on loss of control of subsidiary undertakings - - 33,383 - - 33,383 ------------------ ---------------- --------------- ---------------- ---------------- --------------- ---------- At 30 September 2018 (15,886) 14,808 (127,548) (7,676) 347 (135,955) ------------------ ---------------- --------------- ---------------- ---------------- --------------- ---------- Cash flow Share-based Capital hedge payment Foreign Treasury redemption exchange shares reserve Total $'000 $'000 $'000 $'000 $'000 $'000 At 1 October 2016 (12,499) 5,956 (165,574) (7,676) 347 (179,446) Effective portion of cash flow hedges (406) - - (406) Deferred tax on cash flow hedges 51 - - - - 51 Share-based payment expense - 3,613 - - - 3,613 Release from share-based payment reserve - (577) - - - (577) Translation adjustment - - 10,109 - - 10,109 At 30 September 2017 (12,854) 8,992 (155,465) (7,676) 347 (166,656) ------------------ ---------------- --------------- ---------------- ---------------- --------------- ----------
13. Provisions
Deferred contingent Restructuring and consideration Onerous leases other costs 2018 2017 Total Total $'000 $'000 $'000 $'000 $'000 At the beginning of the year 71,878 324 173 72,375 16,067 (Release)/charge to income statement (11,576) 2,924 12,962 4,310 - Arising on acquisitions 42,408 - - 42,408 65,939 Utilised during the year (5,911) (331) (4,306) (10,548) (14,430) Unwinding of discount 840 - - 840 380 Measurement period adjustment - - - - 999 Translation adjustment (724) (21) (195) (940) 3,420 ------------------------ ----------------------- ----------------- ----------------------- ---------- --------- At end of year 96,915 2,896 8,634 108,445 72,375 ------------------------ ----------------------- ----------------- ----------------------- ---------- --------- Non-current 67,409 1,455 36 68,900 58,470 Current 29,506 1,441 8,598 39,545 13,905 Total 96,915 2,896 8,634 108,445 72,375 ------------------------ ----------------------- ----------------- ----------------------- ---------- ---------
14. Acquisition of subsidiary undertakings
On 1 July 2018, the Group acquired 100% of the issued share capital of Create NYC LLC, an innovative New York-based healthcare creative communications agency, offering the tactical execution of sales and marketing materials for its international pharmaceutical clients. Create NYC's offering comprises a unique, disruptive model which gives its clients high impact, on-demand flexible marketing support with a flat fee structure. The acquisition of Create NYC is in line with Ashfield's strategy to expand into areas of differentiated but aligned adjacencies to its core scientific communication capabilities. The combination of Create NYC with Ashfield Healthcare Communications provides the opportunity to diversify Create NYC's client base and expand internationally.
The Group acquired 100% of SmartAnalyst Inc on 1 July 2018. SmartAnalyst is a US-based strategic consulting and analytics business focused on the pharmaceutical and biotech sector with operations in New York, London and Gurgaon, India. The acquisition of SmartAnalyst is in line with Ashfield's strategy to expand its advisory service proposition for its healthcare clients. Ashfield will provide leverage and opportunities to grow SmartAnalyst's customer base outside the US through Ashfield's global business.
The provisional fair value of the assets and liabilities acquired in the year ended 30 September 2018 are set out below:
Create NYC SmartAnalyst Total $'000 $'000 $'000 ---------------------------------- -------- --------------- --------- Property, plant and equipment 5 173 178 Intangible assets - arising on acquisition 23,030 9,742 32,772 Intangible assets - computer software - 9 9 Deferred tax assets - 49 49 Trade and other receivables 3,046 3,524 6,570 Trade and other payables (738) (2,509) (3,247) Current tax liabilities - (50) (50) Deferred tax liabilities - (2,435) (2,435) Cash acquired 3,533 7,748 11,281 ------------------------------------ -------- --------------- --------- Net assets acquired 28,876 16,251 45,127 Goodwill 27,928 14,113 42,041 ------------------------------------ -------- --------------- --------- Consideration 56,804 30,364 87,168 ------------------------------------ -------- --------------- --------- Satisfied by: Cash consideration 20,044 24,716 44,760 Deferred contingent consideration 36,760 5,648 42,408
------------------------------------ -------- --------------- --------- Total consideration 56,804 30,364 87,168 ------------------------------------ -------- --------------- --------- Net cash outflow - arising on acquisitions Cash consideration 20,044 24,716 44,760 Less: Cash and cash equivalents (3,533) (7,748) (11,281) ------------------------------------ -------- --------------- --------- Net cash outflow 16,511 16,968 33,479 ------------------------------------ -------- --------------- ---------
The intangible assets arising on the acquisitions primarily relate to the trade names, customer relationships, and customer contracts.
The total transaction related costs for completed and aborted acquisitions amounts to $2,374,000. These are presented separately in the Group Income Statement.
The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payments to present value at the acquisition date. In general, for contingent consideration to become payable, pre-defined profit thresholds must be met. On an undiscounted basis, the future payments for which the Group may be liable in respect of current year acquisitions ranges from nil to $47,378,000.
Acquisitions completed during the year contributed revenue of $7,430,000 and profit for the year of $210,000 for the period from date of acquisition until 30 September 2018. The proforma revenue and profit of the Group for the year ended 30 September 2018 would have been $1,336,483,000 and $3,018,000 respectively had the acquisitions taken place at the start of the reporting period. The proforma results for the year includes the estimate of tax expense and amortisation of intangible assets recognised on acquisition.
15. Employee benefits
2018 2017 $'000 $'000 At the beginning of the year 9,217 (6,503) Current service cost (3,033) (2,387) Settlement gain 1,588 2,728 Interest 227 67 Contributions paid 2,578 4,218 Remeasurement gain 2,422 11,098 Translation adjustment (64) (4) ------------------------------- -------- -------- At end of year 12,935 9,217 ------------------------------- -------- -------- Employee benefit asset 12,935 12,379 Employee benefit liability - (3,162) ------------------------------- -------- -------- Total 12,935 9,217 ------------------------------- -------- --------
As set out in the consolidated financial statements for the year ended 30 September 2017, the Group operates a number of defined benefit pension schemes which are funded by the payments of contribution to separately administered trust funds. The employee benefit asset includes both the United States pension scheme and the Republic of Ireland (ROI) pension schemes, while the employee benefit liability in the prior year relates to the ROI pension schemes. The ROI schemes have a remeasurement gain in the current year which comprises of higher than expected returns on plan assets and changes in the assumptions used to measure liabilities of the plan. The US scheme has a remeasurement gain in the year arising from a higher than expected return on plan assets, and a change in financial assumptions. In the ROI schemes, there is no longer a salary increase assumption due to the accrual of pension benefits ceasing from 1 December 2015.
During the current and prior year, a general offer was made to the members of the ROI schemes to transfer their accrued benefits from the schemes in exchange for a fixed monetary amount. Acceptance of the offer was at the discretion of individual members and resulted in a settlement gain of $1,588,000 (2017: $2,728,000).
The principal assumptions and associated changes are as follows:
Republic of Ireland Schemes United States Scheme -------------------------------------------- ---------------------------------------- 2018 2017 2016 2018 2017 2016 Rate of increase in salaries n/a n/a n/a 2.75-4.00% 2.75-4.00% 2.75-4.00% Rate of increase in pensions 0-1.60% 0-1.65% 0-1.50% 0.00% 0.00% 0.00% Inflation rate 1.60% 1.65% 1.50% 2.75% 2.75% 2.75% Discount rate 2.00% 2.05% 1.25% 4.10% 3.60% 3.30%
16. Financial instruments
The fair values of financial assets and financial liabilities, together with the carrying amounts in the consolidated balance sheet at 30 September 2018, are as follows:
Carrying value Fair value $'000 $'000 Financial assets Trade and other receivables 318,339 318,339 Derivative financial assets 2,804 2,804 Cash and cash equivalents 180,099 180,099 ------------------------------------ ---- ----------- 501,242 501,242 ------------------------------------ ---- --------- ----------- Financial liabilities Trade and other payables 163,646 163,646 Derivative financial liabilities 319 319 Interest-bearing loans and borrowings 243,318 247,088 Finance lease liabilities 53 53 Deferred contingent consideration 96,915 96,915 504,251 508,021 ------------------------------------- --- --------- -----------
Trade and other receivables/payables
For receivables and payables, the carrying value less impairment provision is deemed to reflect fair value where appropriate.
Cash and cash equivalents
For cash and cash equivalents, the nominal amount is deemed to reflect fair value.
Interest-bearing loans and borrowings
The fair value of interest-bearing loans and borrowings is based on the fair value of the expected future principal and interest cash flows discounted at interest rates effective at the balance sheet date and adjusted for movements in credit spreads.
Finance lease liabilities
For finance lease liabilities, the fair value is the present value of future cash flows discounted at current market rates.
Valuation techniques and significant unobservable inputs
Fair value hierarchy of assets and liabilities measured at fair value
The Group has adopted the following fair value hierarchy in relation to its financial instruments that are carried in the balance sheet at fair value as at the year end:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices); and
-- Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table sets out the fair value of all financial assets and liabilities that are measured at fair value:
Level Level Level 1 2 3 Total $'000 $'000 $'000 $'000 Assets measured at fair value Designated as hedging instruments Cross currency interest rate swaps - 2,804 - 2,804 ------------------------------------- ------- ------- ------- ------- - 2,804 - 2,804 ---------------------------------- ------- ------- ------- ------- Liabilities measured at fair value At fair value through profit or loss Deferred contingent consideration - - 96,915 96,915 Designated as hedging instruments Cross currency interest rate swaps - 319 - 319 - 319 96,915 97,234 ---------------------------------- ------- ------- ------- -------
Summary of derivatives:
Amount of financial Related amounts Amount of Related amounts assets/liabilities not offset in financial not offset in as presented in the balance 2018 assets/liabilities the balance 2017 the balance sheet sheet Net as presented in sheet Net the balance sheet $000 $'000 $'000 $'000 $'000 $'000 Derivative financial assets 2,804 - 2,804 3,752 - 3,752 Derivative financial liabilities 319 - 319 352 - 352 ------------------ -------------------- ----------------- ------- -------------------- ----------------- -------
All derivatives entered into by the Group are included in Level 2 of the fair value hierarchy and consist of cross currency interest rates swaps. The fair values of cross currency interest rate swaps are calculated as the present value of the estimated future cash flows based on the terms and maturity of each contract and using forward currency rates and market interest rates as applicable for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include, where appropriate, adjustments to take account of the credit risk of the Group entity and counterparty.
Deferred contingent consideration
Deferred contingent consideration is included in Level 3 of the fair value hierarchy. Details of the movement in the year are included in note 13. The fair value is determined considering the expected payment, discounted to present value using a risk adjusted discount rate. The expected payment is determined separately in respect of each individual earn-out agreement taking into consideration the expected level of profitability of each acquisition. The provision for deferred contingent consideration is principally in respect of acquisitions completed during 2012, 2016, 2017 and 2018.
The significant unobservable inputs are:
-- forecast weighted average EBIT growth rate 24% (2017: 26%); and
-- risk adjusted discount rate 0.02% - 2.75% (2017: 0.02% - 1.55%). The increase is principally due to the increase in US base rates.
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 reasonably possible change to one of the significant unobservable inputs at 30 September 2018, holding the other inputs constant, would have the following effects:
Increase Decrease $'000 $000 ----------------------------------------- --------- --------- Effect of change in assumption on income statement sstatstatstatements Annual EBIT growth rate (1% movement) 134 (134) Risk-adjusted discount rate (1% movement) 655 (522) -------------------------------------------- --------- ---------
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.
2018 2017 Times Times Net debt to annualised EBITDA 0.34 0.32 Annualised EBITDA interest cover 22.0 16.3 -------------------------------------- ------- -------
17. Dividends
The Board has proposed a final dividend of 11.75 $ cent per share which gives a total dividend of 16.00 $ cent for 2018. This dividend has not been provided for in the balance sheet at 30 September 2018 as there was no present obligation to pay the dividend at year end. During the financial year, the final dividend for 2017 (9.72 $ cent per share) and the interim dividend for 2018 (4.25 $ cent per share) were paid giving rise to a reduction in shareholders' funds of $34,705,000.
18. Foreign currency
The principal exchange rates used in translating sterling and dollar balance sheets and income statements were as follows:
2018 2017 $1=StgGBP $1=StgGBP Balance sheet (closing rate) 0.7635 0.7469 Income statement (average rate) 0.7436 0.7891 $1=EuroEUR $1=EuroEUR Balance sheet (closing rate) 0.8604 0.8470 Income statement (average rate) 0.8403 0.9047
19. Related parties .
The Group trades in the normal course of business with its joint venture undertakings. The aggregate value of these transactions is not material in the context of the Group's financial results.
The Group has provided a loan to Magir Limited, the Group's joint venture investment, gross of interest, of Stg GBP11,371,000 (2017: Stg GBP10,997,000).
IAS 24 Related Party Disclosures requires the disclosure of compensation paid to the Group's key management personnel. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. UDG Healthcare classifies directors, the Company Secretary and members of its senior executive team as key management personnel. The senior executive team is the body of senior executives that formulates business strategy along with the directors, follows through on the implementation of that strategy and directs and controls the activities of the Group on a day to day basis.
Key management personnel receive compensation in the form of short-term employee benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of $12,593,000 for the year ended 30 September 2018 (2017: $10,587,000).
20. Capital commitments
Capital expenditure authorised but not contracted for amounted to $8,502,000 (2017: $18,900,000) at the balance sheet date.
21. Contingent liabilities
The Group is subject to various claims that arise in the ordinary course of business. During the year, the Group received a claim from McKesson arising from its purchase of United Drug from the Group in 2016. At present, while the Group continues to engage with McKesson to investigate the claim, the merit of the claim, likely outcome, timing and potential impact on the Group cannot be determined. Accordingly, and as a result of these uncertainties, the Group cannot make any assessment of the likely outcome, or estimate the financial effect of any such claim as at the date of approval of the financial statements.
22. Events after the balance sheet date
There have been no significant events after the balance sheet date which require disclosure.
23. Going concern
The directors believe that the Company and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the preliminary announcement.
24. Board approval
This announcement was approved by the Board of Directors of UDG Healthcare plc on 26 November 2018.
Additional Information
Key performance indicators and non-IFRS performance measures
The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with IFRS financial information, provides stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration.
None of the non-IFRS measurements should be considered as an alternative to financial measures derived in accordance with IFRS. The non-IFRS measurements can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS.
The principal non-IFRS measurements used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the Financial Statements, are as follows:
Net revenue
Definition
This comprises of gross revenue as reported in the Group Income Statement, adjusted for revenue associated with pass-through costs for which the Group does not earn a margin.
2018 2017 Calculation $'000 $'000 ----------------------- ----------------- --------- --------- Revenue Income Statement 1,315,186 1,219,755 Pass - through revenue (185,494) (191,269) ------------------------------------------ --------- --------- Net revenue 1,129,692 1,028,486 ------------------------------------------ --------- ---------
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).
2018 2017 Calculation $'000 $'000 ------------------------------------ ----------------- ------- ------- Operating profit Income Statement 5,501 103,186 Transaction costs Income Statement 2,374 4,028 Amortisation of acquired intangible assets Note 10 31,001 22,066 Exceptional items Note 7 108,630 - Adjusted operating profit 147,506 129,280 ------------------------------------------------------- ------- -------
Adjusted profit before tax
Definition
This comprises profit before tax as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).
2018 2017 Calculation $'000 $'000 ------------------------------------ ----------------- -------- ------- Profit before tax Income Statement 8,386 92,834 Transaction costs Income Statement 2,374 4,028 Amortisation of acquired intangible assets Note 10 31,001 22,066 Exceptional items Note 7 97,054 - Adjusted profit before tax 138,815 118,928 -------------------------------------------------------- ------- -------
Adjusted operating margin
Definition
Measures the adjusted operating profit as a percentage of revenue.
2018 2017 Calculation $'000 $'000 --------------------------- ------ ---------------------------- --------- Adjusted operating profit Per above 147,506 129,280 Revenue Income Statement 1,315,186 1,219,755 -------------------------- -------------------------- --------- --------- Adjusted operating margin 11.2% 10.6% ------------------------------- -------------------------------- ---------
Adjusted net operating margin
Definition
Measures the adjusted operating profit as a percentage of net revenue.
2018 2017 Calculation $'000 $'000 ------------------------------- ------------- --------- --------- Adjusted operating profit Per above 147,506 129,280 Net revenue Per above 1,129,692 1,028,486 ------------------------------ -------------- --------- --------- Adjusted net operating margin 13.1% 12.6% ----------------------------------- -------------------- ---------
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.
2018 2017 Calculation $'000 $'000 ---------------------------------------------- ----------------- ------- ------- Tax charge Income Statement 4,529 20,976 Tax relief with respect to transaction costs 180 370 Deferred tax credit with respect to acquired intangible amortisation 7,715 5,070 Tax relief with respect to exceptional items Note 7 1,548 - Deferred tax credit associated with the Note 7 US Tax Cuts and Jobs Act 9,715 - ---------------------------------------------- ----------------- ------- ------- Income tax expense before exceptional, transaction costs and deferred tax attaching to amortisation of acquired intangible assets 23,687 26,416 ----------------------------------------------------------------- ------- ------- Adjusted profit before tax Per above 138,815 118,928 Adjusted effective tax rate 17.1% 22.2% ----------------------------------------------------------------- ------- -------
Adjusted and annualised EBITDA
Definition
Adjusted EBITDA is included as a new performance measure in 2018 as it 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 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 and the EBITDA of completed disposals.
2018 2017 Calculation $'000 $'000 ------------------------------------------- -------------------- ------- ------- Operating profit Income Statement 5,501 103,186 Exceptional items Note 7 108,630 - Transaction costs Income Statement 2,374 4,028 Amortisation of acquired intangible assets Note 10 31,001 22,066 ------------------------------------------- -------------------- ------- ------- Adjusted operating profit 147,506 129,280 Share-based payment expense Cash Flow Statement 5,069 3,613 Depreciation Cash Flow Statement 24,477 21,221 Amortisation of computer software Note 10 6,036 3,384 Joint venture profit share Income Statement (958) (667) (Profit)/loss on disposal of property, plant and equipment Cash Flow Statement (340) 55 Adjusted EBITDA 181,790 156,886 Share-based payment expense Cash Flow Statement (5,069) (3,613) Transaction costs (2,374) (4,028) EBITDA of completed disposals (2,845) - Annualised EBITDA of acquisitions(1) 6,079 14,827 ----------------------------------------------------------------- ------- ------- Annualised EBITDA 177,581 164,072 ----------------------------------------------------------------- ------- -------
(1) Includes EBITDA for acquisitions which were not part of the Group for the full financial year.
Financial ratios
Definition
The net debt to EBITDA and EBITDA interest cover ratios disclosed in note 16 are calculated using annualised EBITDA and adjusted net finance expense (net finance expense excluding interest on pension scheme obligations and the unwinding of discount on provisions, see note 5). 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 11.
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 year excluding net debt adjusted for the historical amortisation of acquired intangible assets and restructuring charges.
2018 2017 Calculation $'000 $'000 ----------------------------------- ---------- --------- --------- Balance Net assets Sheet 885,343 880,656 Net debt Note 11 60,787 53,266 ----------------------------------- ---------- --------- --------- Assets before net debt 946,130 933,922 Historical intangible amortisation 189,206 176,997 Historical restructuring costs 38,365 47,494 ----------------------------------------------- --------- --------- Total capital employed 1,173,701 1,158,413 ----------------------------------------------- --------- --------- Average total capital employed 1,166,057 1,006,869 Adjusted operating profit Per above 147,506 129,280 ----------------------------------- ---------- --------- --------- Return on capital employed 12.7% 12.8% ----------------------------------------------- --------- ---------
Constant currency
Definition
The translation of foreign denominated earnings can be impacted by movements in foreign exchange rates versus US dollars, the Group's presentation currency. In order to present a better reflection of underlying performance in the year, the Group retranslates foreign denominated prior year earnings at current year exchange rates.
Year ended Year ended 30 September 30 September 2018 2017 Revenue - constant currency $'000 $'000 Revenue 1,315,186 1,219,755 Currency impact - 37,176 --------------------------------------------------- -------------- -------------- Revenue - constant currency 1,315,186 1,256,931
--------------------------------------------------- -------------- -------------- Revenue - constant currency increase on 2017 58,255 Revenue - constant currency increase on 2017 % 5% --------------------------------------------------- -------------- -------------- Net revenue - constant currency $'000 $'000 Net revenue 1,129,692 1,028,486 Currency impact - 32,340 --------------------------------------------------- -------------- -------------- Net revenue - constant currency 1,129,692 1,060,826 --------------------------------------------------- -------------- -------------- Net revenue - constant currency increase on 2017 68,866 Net revenue - constant currency increase on 2017 % 6% --------------------------------------------------- -------------- -------------- Adjusted operating profit - constant currency $'000 $'000 Adjusted operating profit 147,506 129,280 Currency impact - 2,812 --------------------------------------------------- -------------- -------------- Adjusted operating profit - constant currency 147,506 132,092 --------------------------------------------------- -------------- -------------- Adjusted operating profit - constant currency increase on 2017 15,414 Adjusted operating profit - constant currency increase on 2017 % 12% --------------------------------------------------- -------------- -------------- Adjusted profit before tax - constant currency $'000 $'000 Adjusted profit before tax 138,815 118,928 Currency impact - 2,019 --------------------------------------------------- -------------- -------------- Adjusted profit before tax - constant currency 138,815 120,947 --------------------------------------------------- -------------- -------------- Adjusted profit before tax - constant currency increase on 2017 17,868 Adjusted profit before tax - constant currency increase on 2017 % 15% --------------------------------------------------- -------------- -------------- Adjusted diluted earnings per share ('EPS') - constant currency $'000 $'000 Adjusted profit attributable to owners of the parent 115,067 92,512 Currency impact - 1,737 --------------------------------------------------- -------------- -------------- Adjusted profit attributable to owners of the parent - constant currency 115,067 94,249 --------------------------------------------------- -------------- -------------- Weighted average number of shares used in diluted EPS calculation 250,464,788 249,239,387 Adjusted diluted EPS - constant currency (cent) 45.94 37.81 Adjusted diluted EPS - constant currency increase on 2017 (cent) 8.13 Adjusted diluted EPS - constant currency increase on 2017 % 22% --------------------------------------------------- -------------- --------------
The dividend per share constant currency increase on 2017 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.
Measurements removed from the additional information section that are shown elsewhere in the preliminary announcement are as follows:
-- Adjusted diluted earnings per share - this measurement is shown in note 8
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.
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November 27, 2018 02:00 ET (07:00 GMT)
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