UDG Healthcare poised for future growth after disposals

UDG Healthcare is in a net cash position to deliver sustained future growth after the disposal of its United Drug Supply Chain (UDSC) businesses and MASTA.

The group’s disposal of the (UDSC) businesses and MASTA completed on 1 April 2016 resulted in a net profit of €132.1m. Net cash at 30 September 2016 was €128.3m.

The company has also completed the acquisition of Pegasus,a UK-based healthcare communications business, in april 2016 and STEM, a leading global provider of commercial and medical audits to pharmaceutical companies, post year end. According to the board, both are an “excellent strategic fit” for Ashfield with “good growth prospects and higher margin profile.”

Revenue grew 3% to €943.1m for the year ended 30 September 2016. Operating profit grew 8% to €104.2m and Operating margin increased to 11.1% to 10.5%. Profit before tax was up 10%.

Diluted earnings per share from continuing operations increased by 8%. Final dividend increased from 8.50 cents per share yielding a full year dividend of 11.55c per share.

Return on capital employed (ROCE) for 2016 was up 13.7% from 13.5% in 2015.

The company operates across three divisions: Ashfield commercial and Medical services, Sharp Packaging services and Aquilant specialist healthcare services.

Asfield’s operating profit increased by 7% driven by positive underlying growth in both Ashfield Commercial & Clinical and Communications.

Sharp’s operating profit increased by 16% driven by continued growth in the US commercial packaging business. The division has also completed the build and fit out of its new packaging facility in Pennsylvania increasing US commercial packaging capacity by approximately 30%.

Aquilant’s performance was on the other hand negatively impacted by adverse currency movements with underlying operating profit down to €6.2m from €7.2m in 2015.

Chief executive Brendan McAtamney said: “2016 saw the continuing business deliver another year of good growth as the Group positioned itself for the next phase of development, following the disposal of the United Drug Supply Chain businesses. The Group has made significant progress in delivering on its strategy to capitalise on an increasing trend among healthcare companies to outsource non-core and specialist activities on an international basis.”

The share price fell 5.59% to 621p at 1022 GMT on Thursday.