United Drug delivers strong Q1 performance

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07 February 2012

Quarterly revenues and profits in Healthcare Supply Chain ahead of forecasts

United Drug has issued an Interim Management Statement covering the period from 1 October 2011 to date. Trading throughout the Group since the start of the new financial year has been good. Group revenues and profits for the quarter to 31 December 2011 are ahead of the first quarter of last year. Much of this development has come in the Company’s international operations with the businesses outside of Ireland contributing almost 70.0% of group profits in the quarter. In addition, cash generation for the period was good and ahead of forecasts.

In the quarter to 31 December 2011, revenues and profits in the Healthcare Supply Chain division are ahead of forecasts for the period and in line with the same period last year.

In the Republic of Ireland, while profits are down slightly, the wholesale business continues to outperform a market that declined in value by almost 3.0% in the quarter as a result of recent regulatory changes. Cost savings, following last year's restructuring, are now being realised and the business should continue to trade well, in a tough environment, through the remainder of the year. The Northern Ireland wholesale business has also outperformed its market and grown profits well ahead of last year in the quarter.

The pre-wholesale businesses have traded well in the period particularly in the UK where recent new business wins have started to contribute resulting in a significant uplift in profits, in line with expectations. There have also been a number of new contract wins in Ireland during this period and they will add to the business later in the year.

Encouragingly, after a number of difficult years, the Medical & Scientific business, both in the UK and Ireland, has had a strong first quarter with profits well ahead of last year.

The introduction of a drug tariff on certain specials medicines in the UK has had an impact on businesses in this sector. However, the tariff will help to remove uncertainty from this market and the Company expects its businesses to continue to trade well.

Revenues and profits for the Sales, Marketing & Medical division are ahead of the same period last year with all business units making a contribution. The Company continues to be the clear market leader in the provision of contract sales outsourcing services in the developed UK market and despite on-going pricing pressures it has further grown this business during the period. The Company is currently a much smaller player in the less penetrated US contract sales outsourcing market but has grown its position significantly during the period.

The integration of the pharmaceutical events management businesses acquired in recent years is proving very successful and good growth in this business has been recorded. The Company has also made considerable progress in its healthcare communications and consultancy offering and this unit has grown well ahead of forecasts for the period.

The Packaging & Specialty division has made a very good start to the year with revenues and profits ahead of last year. The US packaging business continues to grow and develop as its high quality offering wins more customers. Revenues and profits in the business for the quarter are ahead of what was a very strong first quarter last year. The European packaging business is at an earlier stage in its development and operates in a more fragmented and less developed market. However the benefit of providing packaging solutions across two continents is paying off as business from US customers looking to have product packaged in the EU is assisting the European business as it continues to fill its new business pipeline and utilise available capacity.

In recent days a leading pharmaceutical company has notified the Company’s packaging division that it has been awarded a significant multi-year packaging contract. This contract will add in excess of €30.0 million to divisional revenues over a four year period.

The Irish specialty business, the market leader, has grown well in the period and has a number of exciting opportunities as community and home healthcare services develop in Ireland.

Looking ahead, based on the good trading performance for the year to date, the outlook for the remainder of the year, and stability in current exchange rates, the Group expects adjusted diluted earnings per share for the year to 30 September 2012 to be between 4.0% and 8.0% ahead of last year. The Group also expects to deliver another strong cash flow performance in the year. With relatively modest debt levels and strong cash flows the Group is well positioned to support its future growth objectives both organically and through additional acquisitions.

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