Source - LSE Regulatory
RNS Number : 3001Y
UDG Healthcare Public Limited Co.
12 May 2021
 

UDG Healthcare plc

Interim Report 2021

 

Strong first half performance

 

12 May 2021: UDG Healthcare plc ("UDG Healthcare" or "Group"), a leading international healthcare services provider, announces its results for the six months to 31 March 2021, in which the Group delivered a strong performance.

 

Key highlights 

 

·    Adjusted diluted earnings per share (EPS) increased by 8%* against a strong comparative period

·    Group net revenue flat* on the prior period 

·      Adjusted operating profit increased by 10%* (8% underlying and 2% acquisition benefit):

A good performance across both parts of Ashfield with adjusted operating profit up 7%* against a strong comparative period; and

A continued strong performance from Sharp with adjusted operating profit increasing by 19%*

·      Adjusted Group net operating margins increased from 13.6% to 14.8% with margins increasing in both Ashfield and Sharp

·      $80 million committed to strategic acquisitions to date, including:

Acquisition of PHMR Limited ("PHMR"), a market access consultancy based in the U.K. and Ireland, announced in January 2021 for up to $43.6 million; and

o  Acquisition of Nuvera LLC ("Nuvera"), a US-based healthcare consultancy specialising in patient support programmes for a         total potential consideration of up to $36 million in April 2021 (post period end)

·    Robust balance sheet with net debt to EBITDA of 0.2x and a continued strong free cash flow conversion performance of 76%

·    The FY21 financial guidance provided with our First Quarter Trading Update on 26 January has been adjusted as follows to reflect the benefit of the acquisition of Nuvera announced today:

Constant currency adjusted operating profit growth of between 12% and 14% (previously 11% and 13%) ahead of the $165.3m reported in FY20 

Constant currency adjusted diluted earnings per share (EPS) growth of between 10% and 12% (previously 9% and 11%) ahead of the 47.71 $ cent reported in FY20

 

* on a constant currency basis

 

Chief Executive's comment

 Chief Executive Officer, Brendan McAtamney commented:

 

"We are pleased to report another strong trading performance, predominantly driven by underlying operating profit growth across both Ashfield and Sharp, supplemented by the benefit of recent acquisitions.

 

We continue to expand the range of services we offer clients across many therapeutic areas including several COVID-19 related projects. Additionally, we continued to execute strategic acquisitions, committing $80m to date in FY21, expanding our capabilities in market access and patient support programmes, and further growing our presence across the U.K., E.U. and U.S. 

 

Looking ahead, our businesses remain resilient, supported by their market leading positions and compelling service offerings, underpinned by excellent long-term market fundamentals."

 

Shareholders are referred to today's announcement of a recommended cash offer for the entire issued and to be issued share capital of UDG Healthcare plc by Nenelite Limited (a newly incorporated company and affiliate of Clayton, Dublier  & Rice LLP, formed for Clayton, Dublier  & Rice LLP,  in its capacity as adviser to Clayton, Dublier & Rice LLC as manager of CD&R Funds X and XI)).

 

 

Financial Results - six months to 31 March 2021

 

 

IFRS based

 

 

 

 

31 March 2021

$'m

31 March 2020

$'m

 

Increase/

(decrease)

 %

 

Revenue

 

 

661.4

693.6

(5)

 

Operating profit

 

 

72.6

68.5

6

 

Profit before tax

 

 

65.1

62.3

5

 

Diluted earnings per share ("EPS") (cent)

 

 

20.35

22.03

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

31 March 2021

31 March 2020

30 September 2020

 

Net debt ($'m)

 

 

34.3

58.2

16.2

 

Net debt ($'m) including IFRS 16 lease liabilities

 

 

136.6

157.1

119.9

 

Net debt/annualised EBITDA (times)

 

 

0.2

0.3

0.1

 

 

 

 

 

 

 

 

Alternative performance measures1

 

 

 

 

 

 

31 March 2021

$'m

31 March 2020

$'m

Increase/

(decrease)

%

 

Constant currency increase/

(decrease)

%

Revenue

 

 

661.4

693.6

(5)

(7)

Net Revenue

 

 

609.0

596.2

2

-

Adjusted operating profit

 

 

90.0

81.3

11

10

Adjusted profit before tax

 

 

82.4

75.0

10

10

Adjusted diluted earnings per share ("EPS") (cent)

 

 

25.55

23.64

8

8

 

 

 

Group development and outlook

 

Supporting our clients to develop treatments and vaccines for COVID-19 and protecting our people

Across the Group, we continue to use our expertise to support our clients in their efforts to bring COVID-19 treatments and vaccines to the market.

 

Sharp continues to support the packaging and distribution of multiple clinical trials and treatments related to COVID-19. Ashfield is providing support on multiple COVID-19 related products, ranging in scale and at various stages of progress. It is due to the commitment and dedication of our people across the Group that we have been able to continue to support our clients as they develop drugs and treatments for patients across the world.

 

Corporate development

The Group continued to make good progress from a corporate development perspective, completing two strategic and complementary acquisitions to date for a total consideration of up to $80m.

 

As previously announced, in January 2021, Ashfield completed the acquisition of PHMR, a market access consultancy based in the U.K. and Ireland. The business specialises in healthcare technology assessment, pricing and reimbursement strategy, and real-world evidence generation. PHMR was acquired for a total consideration of up to $43.6 million, comprising an initial consideration of $30 million, with an earn-out of up to $13.6 million payable over two years, based on the achievement of agreed performance targets.

 

In April 2021, post the period end, Ashfield completed the acquisition of Nuvera, a healthcare consultancy business specialising in helping clients to design, implement and manage patient support programmes that enhance access to treatments, and improve adherence to rare disease and specialty therapeutics. Based in New Jersey, USA, Nuvera's service offering is highly complementary to Ashfield Engage's Patient Solutions business. Nuvera was acquired for a total consideration of up to $36 million, $24 million paid initially, in addition to an earn-out of up to $12 million over a three-year period.

 

Balance sheet and liquidity

The Group's net debt was $34.3 million (0.2x net debt to EBITDA) at 31 March 2021. This compares to the Group's banking covenant of 3.5x net debt to EBITDA.

 

The Group's strong balance sheet leaves it well placed to fund the continued organic and inorganic development of its two global growth platforms Ashfield and Sharp, through capital investment and further strategic acquisitions as those opportunities arise.

 

Group outlook

The FY21 financial guidance provided with our First Quarter Trading Update on 26 January has been adjusted as follows to reflect the benefit of the acquisition of Nuvera announced today:

Constant currency adjusted operating profit growth of between 12% and 14% (previously 11% and 13%) ahead of the $165.3m reported in FY20 

Constant currency adjusted diluted earnings per share (EPS) growth of between 10% and 12% (previously 9% and 11%) ahead of the 47.71 $ cent reported in FY20.

Additional information in relation to the FY21 financial guidance is included on page 31.

 

 

Notes:

1Alternative performance measures ("APMs) are financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. APMs are presented to provide readers with additional financial information that is regularly reviewed by management. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with IFRS financial information, provides stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. APMs should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS. See "Additional Information" on page 32 for definitions and reconciliations to the closest respective equivalent GAAP measure.

 

 

Review of Operations

for the six months to 31 March 2021

 

Ashfield

 

 

Six months to 31 March

 

2021

2020

Actual

Underlying

 

 

$'m

$'m

Growth

Growth2

Revenue

 

 

 

 

 

Advisory & Health

 

226.0

220.4

3%

(1%)

Engage

 

248.4

287.5

(14%)

(15%)

Total

 

474.4

507.9

(7%)

(9%)

 

 

 

 

 

 

Net revenue1

 

 

 

 

 

Advisory & Health

 

212.8

201.0

6%

3%

Engage

 

209.2

209.4

-

(1%)

Total

 

422.0

410.4

3%

1%

 

 

 

 

 

 

Adjusted operating profit3

 

 

 

 

 

Advisory & Health

 

45.3

41.1

10%

8%

Engage

 

17.9

17.5

2%

3%

Total

 

63.2

58.6

8%

6%

 

 

 

 

 

 

Adjusted operating margin3

 

 

 

 

 

Operating margin (on revenue)

 

13.3%

11.5%

 

 

Net operating margin (on net revenue)

 

15.0%

14.3%

 

 

 

1 Net revenue represents reported revenue adjusted for revenue associated with pass-through costs, for which the Group does not earn a margin. There are no pass-through revenues in Sharp.

2 Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.

3 Adjusted operating profit is operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items.

 

 

Ashfield generated net revenue of $422.0 million and adjusted operating profit of $63.2 million, 3% and 8% ahead of the prior period respectively. This was against a strong comparative period, which was not negatively impacted by COVID-19. Adjusting for the impact of currency translation movements and the contribution from acquisitions, underlying net revenue and operating profit were ahead by 1% and 6% respectively.

 

Ashfield Advisory & Health, which represents approximately 72% of Ashfield's operating profits, continued to perform strongly with net revenue increasing by 6% and operating profit increasing by 10%, including the benefit of the January 2021 acquisition of PHMR. On an underlying basis, net revenue increased by 3% and operating profit increased by 8%, in part driven by the continued recovery of activity levels in STEM. 

 

Ashfield Engage, which represents approximately 28% of Ashfield's operating profits, has demonstrated considerable resilience through the pandemic, with H1 FY21 net revenue flat on the prior period and operating profit increasing by 2%, compared to a non-COVID impacted prior period. Despite the multiple challenges presented by the pandemic impacting in-field based activity levels, Ashfield Engage's investments in omni-channel capabilities and digital engagement prior to the pandemic have enabled the business to provide new hybrid models of delivery to clients. As a result, activity levels have demonstrated further sequential improvement compared to the second half of FY20. 

 

Overall, Ashfield remains a strong and well diversified business that has demonstrated considerable resilience during the pandemic, underpinned by its strong proposition and market leading positions. Ashfield continues to deliver on its strategy to diversify and expand its service offering, increase collaboration between its three business units, supported by the recent rebranding, and execute strategic acquisitions to complement existing capabilities. This leaves Ashfield well placed to continue to deliver underlying operating profit growth in line with the Group's medium-term outlook, complemented by strategic acquisitions.

 

Sharp

 

Six months to 31 March

 

2021

2020

Actual

Underlying

 

 

$'m

$'m

Growth

Growth1

Revenue

 

187.0

185.8

1%

(4%)

 

 

 

 

 

 

Adjusted operating profit2

 

26.8

22.7

18%

14%

 

 

 

 

 

 

Adjusted operating margin %2

 

14.3%

12.2%

 

 

 

1 Underlying growth adjusts for the impact of currency translation movements and any acquisition or disposal activity.

2 Adjusted operating profit is operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items.

 

 

Sharp continued to perform well in in the first half of FY21, generating revenue of $187.0 million and adjusted operating profit of $26.8 million, 1% and 18% respectively ahead of the same period last year. Sharp's operating margin improved from 12.2% to 14.3%. Adjusting for the impact of currency translation movements and the contribution from acquisitions, underlying net revenue was down 4% while operating profit was ahead by 14%.

 

The 4% decline in underlying net revenues compared to the prior year reflected the closure of the Sharp EU Oudehaske site in FY20. Excluding this impact, adjusted underlying revenues declined by approximately 2%, driven by the timing of client product launches in the US commercial business, coupled with some short-term disruption to production from the heavy snow storms in February 2021 in the Allentown area of Pennsylvania, where Sharp's main campus is located.

 

On an underlying basis, the strong operating profit growth was driven by continued mix improvements, in addition to increased efficiency improvements across the network. 

 

The strong reported operating profit growth includes the contribution from the August 2020 acquisition of a 25% stake in Berkshire Sterile Manufacturing ("BSM"), a Massachusetts based sterile packaging and manufacturing services business, which further expanded Sharp's capabilities into sterile fill/finish manufacturing. BSM is performing well and there is increasing collaboration and cross-selling with Sharp, with both businesses providing multiple commercial opportunities to each other.

 

Sharp continues to invest in its facility network to support the continued growth of the business. Having completed the acquisition of a commercial US packaging facility in Macungie, PA in 2020, Sharp continues to invest in and expand its capacity and footprint at its U.S. Allentown and Conshohocken facilities, in addition to expanding its European Heerenveen facility.

 

These investments reflect the continued strong demand and positive market dynamics for Sharp's services, leaving it well placed to meet the increasing demand from new and existing clients across all packaging formats and to deliver strong underlying operating profit growth in line with the Group's medium term outlook.

 

 

For further information, please contact:

 

Investors and Analysts:

Keith Byrne

Head of Investor Relations, Strategy & Corporate

Communications

UDG Healthcare plc

Tel: + 353-1-468-9000

 

Business / Financial Media:

Lisa Kavanagh / Eavan Gannon

Powerscourt

Tel: + 44-207-250-1446

udghealthcare@powerscourt-group.com 

 

 

About UDG Healthcare plc

UDG Healthcare plc (LON: UDG) is a FTSE 250 global leader in the healthcare advisory, marketing, communications, strategic engagement, patient solutions and packaging services. UDG employs 9,000 people across operations in 29 countries, delivering services in over 50 countries.

 

Operating across two divisions, Ashfield and Sharp, UDG provides outsourced services which enable over 300 healthcare companies from large pharmaceutical to small biotech companies.

 

Ashfield is a global integrated healthcare services partner, operating across three business areas: Ashfield Advisory, Ashfield Engage and Ashfield Health. The division enables its healthcare clients to bring their products to market, supporting them through every stage of the product lifecycle, to improve the lives of patients. Ashfield offers a breadth of services, developed organically and through acquisition, across strategic consulting, benchmarking, commercialisation, customer engagement, events, marketing and communications.

Sharp is a global leader in contract commercial packaging, clinical, manufacturing and technology services for the pharmaceutical and biotechnology industries, operating from eight state-of-the-art facilities in the U.S. and Europe.

 

For more information, please go to: www.udghealthcare.com

 

 

Forward-looking information

Some statements in this announcement are or may be forward looking statements. In particular, any statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated cost savings and synergies and the execution of the Group's strategy, are forward looking statements. They represent expectations for the Group's business, including statements that relate to the Group's future prospects, developments and strategies, and involve risks and uncertainties both general and specific, because they relate to events and depend upon circumstances that will occur in the future. The Group has based these forward looking statements on assumptions regarding present and future strategies of the Group and the environment in which it will operate in the future. However, because they involve known and unknown risks, uncertainties and other factors including but not limited to general economic, political, financial, health, security and business factors, as well as international, national and local conditions which are beyond the Group's control, actual results, performance, operations or achievements expressed or implied by such forward looking statements may differ materially from those expressed or implied by such forward looking statements and accordingly you should not rely on these forward looking statements in making investment decisions. Any forward looking statements speak only as of the date they are made and, except as required by applicable law or regulation, neither the Group nor any other party intends to update or revise these forward-looking statements after the date these statements are published, whether as a result of new information, future events or otherwise. Save for the FY21 financial guidance referred to in this document, nothing in this document should be construed as a profit forecast. UDG Healthcare plc and its directors accept no liability to third parties.

 

 

Finance Review

for the six months to 31 March 2021

 

 

IFRS based

 

 

 

31 March 2021

$'m

31 March 2020

$'m

 

Increase/

(decrease)

%

 

Revenue

 

 

661.4

693.6

(5)

 

Operating profit

 

 

72.6

68.5

6

 

Profit before tax

 

 

65.1

62.3

5

 

Diluted earnings per share ("EPS") (cent)

 

 

20.35

22.03

(8)

 

 

Alternative performance measures1

 

 

 

 

 

 

31 March 2021

$'m

31 March 2020

$'m

Increase/

(decrease)

%

 

Constant currency increase/

(decrease)

%

Revenue

 

 

661.4

693.6

(5)

(7)

Net Revenue

 

 

609.0

596.2

2

-

Adjusted operating profit

 

 

90.0

81.3

11

10

Adjusted profit before tax

 

 

82.4

75.0

10

10

Adjusted diluted earnings per share ("EPS") (cent)

 

 

25.55

23.64

8

8

1 See "Additional Information" on page 32 for more information and reconciliations to the closest respective equivalent GAAP measures.

 

Revenue

Revenue of $661.4 million for the period is 5% behind 2020 (7% on a constant currency basis). Ashfield revenue decreased by 7% and Sharp revenue increased by 1%. Group underlying net revenue decreased by 1%, excluding the impact of foreign exchange, acquisitions and disposals. The larger decline in gross revenue versus net revenue is due to lower pass-through costs principally due to a decline in our Events Experience business due to COVID-19. 

 

Adjusted operating profit

Adjusted operating profit of $90.0 million is 11% ahead of 2020 (10% on a constant currency basis).

 

Adjusted net operating margin

The adjusted net operating margin for the businesses for the period is 14.8%, ahead of 13.6% in 2020.

 

Adjusted profit before tax

Net interest costs for the period of $7.5 million are 20% higher than 2020, primarily due to lower interest income on U.S. cash deposits and higher interest expense as a result of the issuance of the $99.9 million private placement loan notes in August 2020. This delivered an adjusted profit before tax of $82.4 million.

 

Taxation

The effective taxation rate has increased from 21.0% in 2020 to 21.8% in 2021, due to an increase in the proportion of profit earned in the U.S.

 

Adjusted diluted earnings per share

Adjusted diluted earnings per share ('EPS') is 8% ahead (8% on a constant currency basis) of 2020 at 25.55 $ cent.

 

Foreign exchange

The Group operates in 29 countries, with its primary foreign exchange exposure being the translation of local income statements and balance sheets into U.S. dollar for Group reporting purposes. The retranslation of non-U.S. dollar profits to U.S. dollar has not resulted in a change to the reported adjusted diluted EPS growth of 8%.

 

The average H1 FY21 exchange rates were $1: £0.7415 and $1: €0.8342 (2020: $1: £0.7797 and $1: €0.9051).

 

Cash flow

The table displayed below includes information for the periods ended 31 March 2021 and 2020.

 

 

2021

2020

 

$'000

$'000

Net cash inflow from operating activities

86,536

97,526

Net cash outflow from investing activities

(65,083)

(43,182)

Net cash outflow from financing activities

(40,295)

(38,762)

Net change in cash and cash equivalents

(18,842)

15,582

Effect of exchange rate changes on cash and cash equivalents

1,654

313

Cash and cash equivalents at beginning of period

246,045

135,228

Cash and cash equivalents end of period

228,857

151,123

 

Net cash inflow from operating activities

The net cash inflow from operating activities is $86.5 million (2020: $97.5 million).

 

2021

2020

 

$'000

$'000

Adjusted EBITDA

117,153

107,099

Interest paid

(7,005)

(5,930)

Income taxes paid

(19,143)

(17,348)

Working capital decrease

1,473

20,298

Other cash outflows

(5,942)

(6,593)

Net cash inflow from operating activities

86,536

97,526

 

Income taxes paid increased mainly due to increased profitability, offset in part by a reduction due to changes in payment dates under U.K. tax legislation in 2020. Working capital decreased by $1.5 million (2020: $20.3 million decrease). The decrease in working capital is due to strong cash collection offset by a partial unwind of the impact of COVID-19 on customer billings in 2020. Other cash outflows of $5.9 million relates to transaction costs paid of $1.0 million and exceptional items outflow of $5.0 million relating to the 2020 exceptional charge (2020 cash flows of $6.6 million relate to transaction costs paid of $0.9 million and exceptional items outflow of $5.7 million).

 

Net cash outflow from investing activities

Net cash outflow from investing activities is $65.1 million, compared to $43.2 million in 2020. During the period, $23.6 million was invested in property, plant and equipment, primarily in Sharp's U.S. operations. Acquisition activity in the period resulted in net cash payments of $29.6 million and deferred contingent consideration outflows of $7.9 million.

 

Net cash outflow from financing activities

Net cash outflow from financing activities increased by $1.5 million to $40.3 million in the period, principally due to higher lease payments and higher dividend payments.

 

Balance sheet

Net debt at the end of the period is $34.3 million ($228.9 million cash and $263.2 million debt). Including lease liabilities, net debt at the end of the period is $136.6 million. The net debt to annualised EBITDA ratio is 0.2 times debt (2020: 0.3 times) and net interest is covered 21.2 times (2020: 27.2 times) by annualised EBITDA. Financial covenants in our principal debt facilities exclude lease liabilities under IFRS 16 and are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.

 

Return on capital employed

The Group's ROCE is 13.5% down from 14.1% at 31 March 2020. Details of this calculation are on page 35.

 

Dividends

The directors are not proposing an interim dividend in 2021.

 

 

Principal risks and uncertainties

 

The Transparency (Directive 2004/109/EC) Regulations 2007 require the disclosure of the principal risks and uncertainties which could have a material impact on the Group's performance over the remainder of the financial year.

 

The Group operates within a highly regulated environment and the expectations of our key stakeholders, which include our clients and regulators, are very high. Our services include, for example, communicating to healthcare professionals, pharmaceutical packaging, and the distribution of pharmaceutical products for use in clinical trials. We focus on making sure that we deliver these services correctly and in a compliant way. However, failure to do so could result in adverse consequences for patients and our clients, so the risks that we face in delivering our services are potentially significant.

 

The Group's ability to avoid or mitigate these risks is underpinned by detailed risk registers maintained by each of the Group's divisions and business units. These risk registers identify the risks, as well as the plans for addressing them, and the consolidated Group risk register is reviewed by the executive directors on a regular basis. The consolidated risk register is also reviewed by the Risk, Investment and Financing Committee and the Chairman of that committee reports to the Board on the outcome of each review.

 

The principal risks and uncertainties identified by the risk management process as facing the Group are detailed below:

 

Strategic

 

 

Risk

Impact

Mitigation

Value generation from acquisitions

 

 

Acquisitive growth is a core element of the Group's strategy. A failure to execute and properly integrate acquisitions may impact the Group's projected revenue growth and its ability to capitalise on the synergies they bring and/or to maintain and develop the associated talent pool.

All potential acquisitions are assessed and evaluated to ensure that the Group's defined strategic and financial criteria are met. A discrete integration process and post integration review is developed for each acquisition. This process is supported by experienced management with a view to achieving identified benefits, cultivating talent, and minimising general and specific integration risks.

 

Innovation and insight

 

The continued success of the Group has been dependent upon the development and delivery of innovative solutions to our clients. Examples include serialised packaging and omnichannel contract sales and contact centre solutions. An inability to predict client and market trends and develop and deliver such innovation would be a risk to our market leading positions in the various sectors in which we operate.

Innovation and insight is central to the business and acquisition strategies set down by the Senior Executive Team. At the divisional level, each management team has a responsibility to monitor market changes and identify current and projected client and market demands for new service offerings.  The divisions have designated roles within their business units tasked to deliver on these responsibilities. 

Client diversification

As the Group's activities consolidate and further acquisitions are completed, the Group's client base may become more concentrated, making the Group more susceptible to competitive, client merger or procurement led threats.

In individual business units where there is a high dependence on a small number of key clients, the threats and opportunities are reviewed by divisional management at each business review. The impact that any potential acquisition may have on client concentration is also considered as part of the acquisition assessment process.

Client outsourcing strategy

 

The Group's activities may be impacted by changes to pharma company outsourcing strategy, such as pharma companies reducing their roster of preferred vendors, or the wholesale outsourcing to holding companies that meet all of their service requirements.

In order to maintain or develop a preferred vendor relationship with our target clients, acquisitions can be used to fill any key gaps in client coverage or service offering. The key is to maintain strong client relationships and to keep abreast of potential changes in their business strategies. We have developed an agile Business Development strategy to maximise UDG Healthcare's value to our clients.

 

Talent management

The success of the Group is built upon effective management teams that consistently deliver superior performance. If the Group cannot attract, retain, and develop suitably qualified, experienced, and motivated employees, this could have an impact on business performance.

Talent requirements of the Group are monitored to ensure businesses meet prevailing and anticipated requirements in term of skills, competencies, and performance. There is strong focus on key talent management practices including leadership and management development, succession planning and performance management. A formal talent review process is implemented globally, and local talent reviews are conducted and linked to the global process.

 

Economic, Political, Legislative, Regulatory and Tax

 

The global macroeconomic, political, regulatory, legislative and taxation environment may have a detrimental impact on our client base, the markets in which they operate, the services we can offer them and our operations in those markets. Detrimental impacts could result from, for example, legislative change, tax reform, or trade tensions which remain elevated in many parts of the world.

The Group continues to review its portfolio of investments through the annual strategic review process and through constant challenge at a Senior Executive Team and Board level. Acquisitions and new service offerings are sought which improve the balance of our investments, give greater exposure to innovative and growing market segments, and together with other steps taken by the Group, continue to significantly mitigate the potential impact of Brexit to the Group as a whole.

Operational

 

 

Pandemic risk

The COVID-19 pandemic is an unprecedented global event whose impacts and duration are still not yet fully known. The Group continues to gain understanding of the impacts of the pandemic and expects COVID-19 to continue to affect our operations and performance, and to result in further uncertainty for the Group, its clients and the wider global economy.

The diversified nature of the Group's businesses, our robust balance sheet, and the market fundamentals that underpin our businesses inherently provide mitigation to the Group from Pandemic risk. Our Group business continuity plans have provided an additional layer of mitigation through the COVID-19 crisis. Additionally, the Group continues to actively monitor and assess the potential and realised impacts of COVID-19.

Patient risk

 

Medicines and medical devices can be packaged, supplied, or administered directly to patients by certain Group businesses. The risk of inappropriate advice, packaging, supply, or administration could lead to a negative patient experience.

The level of automation within the Group's packaging facilities continues to increase. The serialisation of packaging processes continues and in addition, the utilisation of electronic batch records improves assurance and reduces the risk of human error in packaging. The embedding of validated software in our patient support programs continues with our Health Cloud CRM and electronic quality management system. Administration of medicines to patients or providing patient support is covered by a detailed client contract with the Marketing Authorisation Holder (MAH), fully approved scripts, and a divisional clinical governance framework.

Regulatory Compliance

 

The Group has many legal and regulatory obligations, including in respect of: (a) protection of patient information (such as HIPAA and GDPR); and (b) patient and employee health and safety. In addition, many of the Group's activities are subject to stringent licensing regulations, for example, FDA, EMEA and national agency manufacturing, packaging and promotional regulations and the serialisation requirements under the Falsified Medicines Directive (FMD). A failure to meet any of these could result in regulatory restrictions, financial penalties, the inability to operate, or products and services being defective, harming patients, and potentially giving rise to very significant liability.

Maintenance of legal, regulatory, and quality standards is a core value of the Group. The Sharp Division is subjected to routine FDA, EMEA and national agency inspections and so is required to be 'audit ready' at all times. Patient education and information programmes are reviewed to ensure compliance with regulation and codes of practice and are subject to regular assessment by the Quality and Risk & Compliance teams. Data protection training, gap analyses and auditing continues across our global locations with a focus on the Group's requirements and local personal data protection compliance.

IT Systems

 

The ability of the Group to support operations and provide its services effectively and competitively is dependent on technology and information systems that are appropriately integrated and that meet current and anticipated future business, regulatory and security requirements.

The Group's technology and information systems and infrastructure are the subject of an ongoing programme to ensure that they are capable of meeting the Group's strategic intent and future requirements. Enhanced governance procedures are in place to ensure alignment with the strategic direction of the Group.

 

Contract risk

The underlying terms of the Group's commercial relationships drive the profitability of the Group. The nature of the Group's business means that the Group could be exposed to undue cost or liability if it agrees onerous terms with its clients or suppliers.

 

The Group has adopted processes for identifying and mitigating against undue risks in all prospective commercial relationships, supported by personnel with expertise and/or experience in key commercial risk areas.

Cyber security

The global threat is increasing due to the activities of criminal organisations and nation states targeting valuable business and personal information through increasingly sophisticated means. These advanced and persistent threats are targeted at business-critical data using, for example, phishing attempts, impersonation, and ransomware for financial and other gain.

The Group has implemented multi-layered information security defences to identify vulnerabilities and protect against attacks. To meet the increasing cyber threat, our systems, procedures, and resources are continuously being reviewed and enhanced to detect and respond effectively to cyber events. Cyber simulation software has been implemented to ensure continuous user awareness.

Business continuity

The Group is exposed to risks that, should they arise, may lead to the interruption of critical business processes that could adversely impact the Group or its clients. COVID-19 has resulted in such interruptions with varying impacts across Group businesses.

Group business continuity plans have been activated to varying degrees based upon the COVID-19 impacts on individual businesses. Our COVID-19 business continuity responses have included enhanced health and safety measures, the use of technology to enable remote working across much of the organisation and the virtual delivery of services to clients, as well as cost control measures. 

Financial

 

 

Financial controls

 

The Group's resources and finances must be managed in accordance with rigorous standards and stringent controls. A failure to meet those standards or implement appropriate controls may result in the Group's resources being improperly utilised or its financial statements being inaccurate or misleading.

The financial controls of the Group, as well as their effectiveness, are monitored by the Board in the context of the standards to which the Group is subject and the expectations of its stakeholders. This monitoring is supported by a dedicated internal audit function. The Group's financial function, systems and controls are also subject to periodic review to ensure that they remain robust and fit for purpose.

Liquidity, interest rates and credit

The Group is exposed to liquidity, interest rate, currency, and credit risks.

The management of the Group's financial risks is governed by policies reviewed and approved by the Board. These policies primarily cover liquidity risk, interest rate risk, currency risk and credit risk. The primary objective of the Group's policies is to minimise financial risk at a reasonable cost. The Group does not trade in financial instruments.

Foreign exchange

The Group's reporting currency is the US dollar. Given the nature of the Group's businesses, exposure arises in the normal course of business to other currencies, principally sterling and euro.

The majority of the Group's activities are conducted in the local currency of the country of operation. As a consequence, the primary foreign exchange risk arises from the fluctuating value of the Group's net investment in different currencies. Our strategic intent is to proportionally grow the U.S. as a source of earnings at a faster rate than other markets, which will reduce the Group's foreign exchange risk.

 

 

Statement of Directors

in respect of the half-yearly financial report

 

Each of the directors confirms that to the best of their knowledge and belief:

 

·   the condensed set of interim financial statements comprising the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, and the related notes have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;

 

·      the half-yearly financial report includes a fair review of the information required by:

(a)  Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)  Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

 

The Group's auditor has not reviewed this condensed half-yearly financial report.

 

On behalf of the Board(i)

S. Cooke

B. McAtamney

Director

Director

 

11 May 2021

 

(i)   The Board of UDG Healthcare plc is disclosed on the Company's website, www.udghealthcare.com.

 

 

Condensed consolidated income statement

for the six months ended 31 March 2021

 

 

 

 

                      

Six months ended

31 March 2021

 

 

 

  Six months ended 31 March 2020

 

 

 

 

 

 

 

 

 

 

Total

31 March

2021

(Unaudited)

$'000

 

 

Pre-

exceptional

items

(Unaudited)

$'000

 

 

Exceptional items (Unaudited)

(Note 5)

$'000

 

Total

31 March

2020

(Unaudited)

$'000

 

Notes

 

 

 

 

 

 

 

Revenue

3

 

 

661,365

 

693,590

-

693,590

Cost of sales

 

 

 

(450,946)

 

(491,046)

-

(491,046)

Gross profit

 

 

 

210,419

 

202,544

-

202,544

 

 

 

 

 

 

 

 

 

Selling and distribution expenses

 

 

 

(104,996)

 

(105,627)

-

(105,627)

Administration expenses

 

 

 

(12,943)

 

(11,879)

-

(11,879)

Other operating expenses

 

 

 

(20,999)

 

(21,524)

-

(21,524)

Other operating income

5

 

 

-

 

-

5,257

5,257

Transaction costs

 

 

 

(1,348)

 

(1,201)

-

(1,201)

Share of equity accounted investments' profit after tax

4

 

 

 

2,474

 

954

-

954

Operating profit

 

 

 

72,607

 

63,267

5,257

68,524

 

 

 

 

 

 

 

 

 

Finance income

6

 

 

451

 

2,065

-

2,065

Finance expense

6

 

 

(7,985)

 

(8,319)

-

(8,319)

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

 

65,073

 

57,013

5,257

62,270

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

 

(13,743)

 

(11,395)

4,379

(7,016)

Profit for the financial period

 

 

 

51,330

 

45,618

9,636

55,254

 

Profit attributable to:

 

 

 

 

 

 

 

 

Owners of the parent

 

 

 

51,331

 

45,609

9,636

55,245

Non-controlling interest

 

 

 

(1)

 

9

-

9

 

 

 

 

51,330

 

45,618

9,636

55,254

 

 

 

 

 

 

 

 

 

Earnings per ordinary share:

 

 

 

 

 

 

 

 

Basic earnings per share - cent

       7

 

 

 

20.39

 

 

 

 

 

 

22.07

Diluted earnings per share - cent

7

 

 

 

20.35

 

 

 

 

22.03

 

 

 

 

 

 

 

 

 

                     

 

Condensed consolidated statement of

comprehensive income

for the six months ended 31 March 2021

 

 

 

 

 

Six months ended

31 March 2021

(Unaudited)

$'000

 

 

 

Six months ended

31 March 2020

(Unaudited)

$'000

 

55,254

 

 

 

Notes

 

Profit for the financial period

 

 

51,330

 

 

 

 

Other comprehensive income/(expense):

 

Items that will not be reclassified to profit or loss:

 

 

 

 

 

Remeasurement gain on Group defined benefit schemes

15

 

       4,577

 

       2,719

Deferred tax on Group defined benefit schemes

 

 

     (1,135)

 

         (586)

 

 

 

         3,442

 

2,133

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Foreign currency translation adjustment

 

 

23,749

 

773

 

Group cash flow hedges:

 

 

 

 

 

- Effective portion of cash flow hedges - movement into reserve

 

(1,084)

 

7,612

 

- Effective portion of cash flow hedges - movement out of reserve

 

208

 

-

 

Effective portion of cash flow hedges

11

 

(876)

 

7,612

- Movement in deferred tax - movement into reserve

 

136

 

(952)

 

- Movement in deferred tax - movement out of reserve

 

(26)

 

-

 

Net movement in deferred tax

11

 

110

 

(952)

 

 

 

22,983

 

7,433

Total other comprehensive income for the period

 

 

26,425

 

9,566

Total comprehensive income for the period

 

 

77,755

 

64,820

 

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

Owners of the parent

 

 

77,761

 

64,804

Non-controlling interest

 

 

(6)

 

16

 

 

 

77,755

 

64,820

 

 

 

Condensed consolidated statement of changes in

equity

for the six months ended 31 March 2021

 

 

 

 

Equity share capital

Share premium

Other reserves  (Note 11)

Retained earnings

Attributable to owners of the parent 

Non-controlling interest

Total equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

At 1 October 2020

14,775

205,894

(126,445)

889,078

983,302

239

983,541

 

 

 

 

 

 

 

 

Profit/(loss) for the financial period

-

-

-

51,331

51,331

(1)

51,330

Other comprehensive income/(expense):

 

 

 

 

 

 

 

Effective portion of cash flow hedges

-

-

(876)

-

(876)

-

(876)

Deferred tax on cash flow hedges

-

-

110

-

110

-

110

Translation adjustment

-

-

23,754

-

23,754

(5)

23,749

Remeasurement gain on defined benefit schemes

-

-

-

4,577

4,577

-

4,577

Deferred tax on defined benefit schemes

-

-

-

(1,135)

(1,135)

-

(1,135)

Total comprehensive

 

 

 

 

 

 

 

Income/(expense) for the period

-

-

22,988

54,773

77,761

(6)

77,755

Transactions with shareholders:

 

 

 

 

 

 

 

New shares issued

48

903

-

-

951

-

951

Share-based payment expense

-

-

4,319

-

4,319

-

4,319

Dividends paid to equity holders

-

-

-

(31,545)

(31,545)

-

(31,545)

Release from share-based payment reserve

-

-

(6,104)

6,104

-

-

-

At 31 March 2021 - unaudited

14,823

206,797

(105,242)

918,410

1,034,788

233

1,035,021

 

 

 

 

 

Equity share capital

Share premium

Other  reserves   (Note 11)

Retained earnings

Attributable to owners of the parent 

Non-controlling interest

Total equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

At 1 October 2019

14,678

198,978

(142,759)

829,459

900,356

207

900,563

Change in accounting policy

-

-

-

1,924

1,924

-

1,924

Restated total equity at the beginning of the financial year

 

14,678

 

198,978

 

(142,759)

 

831,383

 

902,280

 

207

 

902,487

 

 

 

 

 

 

 

 

Profit for the financial period

-

-

-

55,245

55,245

9

55,254

Other comprehensive income/(expense):

 

 

 

 

 

 

 

Effective portion of cash flow hedges

-

-

7,612

-

7,612

-

7,612

Deferred tax on cash flow hedges

-

-

(952)

-

(952)

-

(952)

Translation adjustment

-

-

766

-

766

7

773

Remeasurement loss on defined benefit schemes

-

-

-

2,719

2,719

-

2,719

Deferred tax on defined benefit schemes

-

-

-

(586)

(586)

-

(586)

Total comprehensive income for the period

-

-

7,426

57,378

64,804

16

64,820

Transactions with shareholders:

 

 

 

 

 

 

 

New shares issued

31

24

-

-

55

-

55

Issued in settlement of deferred consideration[1]

 

40

 

6,160

 

-

 

-

 

6,200

 

-

 

6,200

Share-based payment expense

-

-

2,628

-

2,628

-

2,628

Dividends paid to equity holders

-

-

-

(30,887)

(30,887)

-

(30,887)

Release from share-based payment reserve

-

-

(3,469)

3,469

-

-

-

At 31 March 2020 - unaudited

14,749

205,162

(136,174)

861,343

945,080

223

945,303

 

 

 

 

 

 

 

 

 

                             

1The Company issued 723,775 ordinary shares in the period as a part settlement of the deferred consideration for the acquisition of STEM Marketing which the Group acquired in the year ended 30 September 2017.

 

Condensed consolidated balance sheet

as at 31 March 2021

 

 

As at 31 March

2021

 

As at 31 March

2020

 

As at 30 September 2020

 

 

(Unaudited)

(Unaudited)

(Audited)

 

Notes

$'000

$'000

$'000

ASSETS

 

 

 

 

Non-current

 

 

 

 

Property, plant and equipment

8

       203,151

182,122

194,040

Goodwill

9

633,135

570,309

583,101

Intangible assets

9

220,705

230,617

220,387

Equity accounted investments

4

52,189

11,104

50,316

Right of use assets

10

87,181

85,753

88,334

Contract fulfilment assets

 

4,927

5,815

4,834

Derivative financial instruments

12

12,081

21,639

13,138

Deferred income tax assets

 

5,593

5,418

4,081

Employee benefits

15

12,215

9,535

8,592

Total non-current assets

 

1,231,177

1,122,312

1,166,823

 

 

 

 

 

Current

 

 

 

 

Inventories

 

29,622

24,641

28,730

Trade and other receivables

 

336,892

380,315

312,117

Contract fulfilment assets

 

4,807

6,013

4,656

Cash and cash equivalents

12

228,857

151,123

246,045

Current income tax assets

 

3,155

2,235

4,013

Derivative financial instruments

12

1,622

8,993

1,604

Total current assets

 

604,955

573,320

597,165

 

 

 

 

 

Total assets

 

1,836,132

1,695,632

1,763,988

 

 

 

 

 

EQUITY

 

 

 

 

Equity share capital

 

14,823

14,749

14,775

Share premium

 

206,797

205,162

205,894

Other reserves

11

(105,242)

(136,174)

(126,445)

Retained earnings

 

918,410

861,343

889,078

Equity attributable to owners of the parent

 

1,034,788

945,080

983,302

Non-controlling interest

 

233

223

239

Total equity

 

1,035,021

945,303

983,541

 

 

 

 

 

LIABILITIES

 

 

 

 

Non-current

 

 

 

 

Interest-bearing loans and borrowings

12

276,834

174,875

276,920

Lease liabilities

12

84,512

83,515

86,962

Other payables

 

15,698

15,200

15,374

Provisions

13

69,781

79,765

56,978

Deferred income tax liabilities

 

36,727

39,394

33,002

Total non-current liabilities

 

483,552

392,749

469,236

 

 

 

 

 

Current

 

 

 

 

Interest-bearing loans and borrowings

12

72

65,119

64

Lease liabilities

12

17,701

15,353

16,777

Trade and other payables

 

257,034

258,816

236,403

Current income tax liabilities

 

8,713

2,273

13,586

Provisions

13

34,039

16,019

44,381

Total current liabilities

 

317,559

357,580

311,211

 

 

 

 

 

Total liabilities

 

801,111

750,329

780,447

 

 

 

 

 

Total equity and liabilities

 

1,836,132

1,695,632

1,763,988

 

 

 

Condensed consolidated cash flow statement

for the six months ended 31 March 2021

 

 

 

 

Six months

ended

 31 March 2021

(Unaudited)

 

Six months

ended

31 March 2020

(Unaudited)

 

 

$'000

$'000

Cash flows from operating activities

 

 

 

Profit before tax

 

65,073

62,270

Finance income

6

(451)

(2,065)

Finance expense

6

7,985

8,319

Exceptional items

5

-

(5,257)

Operating profit

 

72,607

63,267

Share of equity accounted investments' profit after tax

4

(2,474)

(954)

Transaction costs

 

1,348

1,201

Depreciation of property, plant and equipment

8

11,406

11,331

Depreciation of right of use assets

10

9,404

8,128

Profit on disposal of property, plant and equipment

 

(456)

(26)

Amortisation of intangible assets

9

20,999

21,524

Share-based payment expense

 

4,319

2,628

Increase in contract fulfilment assets

 

(238)

(1,015)

(Increase)/decrease in inventories

 

(852)

614

Increase in trade and other receivables

 

(17,216)

(7,550)

Increase in trade payables and other payables

 

19,779

28,249

Exceptional items paid

 

(4,986)

(5,732)

Transaction costs paid

 

(956)

(861)

Cash generated from operations

 

112,684

120,804

Interest paid

 

(7,005)

(5,930)

Income taxes paid

 

(19,143)

(17,348)

Net cash inflow from operating activities

 

86,536

97,526

 

 

 

 

Cash flows from investing activities

 

 

 

Interest received

 

193

730

Purchase of property, plant and equipment

 

(23,553)

(19,315)

Proceeds from disposal of property, plant and equipment

 

1,381

35

Investment in intangible assets - computer software

 

(5,579)

(3,826)

Acquisition of subsidiaries (net of cash and cash equivalents acquired)

 

14

(29,612)

(21,785)

Deferred consideration paid

 

-

(6,182)

Deferred contingent consideration paid

13

(7,913)

(2,763)

Disposal of subsidiaries (net of cash and cash equivalents disposed)

 

 

-

9,924

Net cash outflow from investing activities

 

(65,083)

(43,182)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of shares (including share premium thereon)

 

951

55

Repayments of interest-bearing loans and borrowings

 

(1,236)

(158)

Proceeds from interest-bearing loans and borrowings

 

1,250

134

Principal elements of lease payments

 

(9,715)

(7,906)

Dividends paid to equity holders of the Company

 

(31,545)

(30,887)

Net cash outflow from financing activities

 

(40,295)

(38,762)

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(18,842)

15,582

Translation adjustment

 

1,654

313

Cash and cash equivalents at beginning of period

 

246,045

135,228

Cash and cash equivalents at end of period

 

228,857

151,123

 

Cash and cash equivalents is comprised of:

 

 

 

Cash at bank and short-term deposits

 

228,857

151,123

 

 

Notes to the condensed interim financial statements

for the six months ended 31 March 2021

 

1.  Reporting entity

UDG Healthcare plc (the "Company") is a company domiciled in Ireland. The unaudited condensed consolidated interim financial information of the Company for the six months ended 31 March 2021, are comprised of the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in equity accounted investments.

 

The financial information presented herein does not amount to statutory financial statements that are required by Section 347 of the Companies Act, 2014 to be annexed to the annual return of the Company. The financial information does not include all the information and disclosures required in the annual financial statements. The statutory financial statements for the year ended 30 September 2020 will be annexed to the annual return and filed with the Registrar of Companies. The audit report on those statutory financial statements was unqualified and did not contain any matters to which attention was drawn by way of emphasis.

 

2.  Statement of compliance and basis of preparation

Basis of preparation

These unaudited condensed consolidated interim financial statements ("the interim accounts") for the six months ended 31 March 2021 have been prepared in accordance with IAS 34, Interim Financial Reporting, as endorsed by the European Union. These interim accounts do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published consolidated financial statements of the Group.

 

The preparation of interim financial statements requires the use of certain critical accounting estimates, judgements and assumptions. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, relate primarily to goodwill impairment testing, revenue recognition, income tax expense, employee benefit obligations, share-based payments and valuation of provisions. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. There was no significant change to any of these key estimates or judgements in the six month period, other than a change to certain actuarial assumptions as set out in Note 15.

 

The income tax expense for the six month period is calculated by applying the directors' best estimate of the effective tax rate applicable to the profit for the period.

 

The Group has assessed the principal risks and uncertainties and continues to monitor and assess the potential and realised impacts of COVID-19. The diversified nature of the Group's businesses, the robust balance sheet, and the market fundamentals that underpin the Group's businesses inherently provide mitigation to the Group from the Pandemic Risk, and as such the Group has continued to trade profitably during the six months ended 31 March 2021.

 

The Group continues to have significant liquidity headroom on its existing financing facilities. At 31 March, the Group has

·      unrestricted cash and cash equivalents of $228.9 million;

·      unused committed debt facilities of up to $246.2 million from a multi-currency revolving senior bank credit facility expiring in May 2026; and

·      bank overdraft facilities of $5.9 million renewable on an annual basis.

 

The Group has low gearing with a net debt of $34.3m and net debt to annualised EBITDA ratio of 0.2, excluding IFRS 16 lease liabilities. There are no material debt maturities until September 2023.

 

Having considered the Group's forecasts, sensitivity analysis and the Group's significant financial headroom, the directors have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group and Company financial statements.

 

Accounting policies

The accounting policies applied in the interim accounts are the same as those applied in the 2020 Annual Report, except for the adoption of new standards, interpretations and standard amendments effective for the Group for the period commencing 1 October 2020. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

 

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 business areas: advisory, engage and health. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle. The division provides field and contact centre sales teams, healthcare communications, patient support, audit, advisory, medical information and event management services to over 300 healthcare companies.

 

Sharp - Sharp is a global leader in contract commercial packaging and clinical trial packaging services for the pharmaceutical and biotechnology industries, operating from state-of-the-art facilities in the US and Europe. 

 

The segmental analysis of the business corresponds with the Group's organisational structure and the Group's internal reporting for the purpose of managing the business and assessing performance as reviewed by the Group's Chief Operating Decision Maker (CODM), which the Group has defined as Brendan McAtamney (Chief Executive Officer). The amount of revenue and operating profit by operating segment is as follows:

 

 

Six months

ended

31 March

2021

 

Six months

ended

31 March

2020

 

$'000

$'000

Revenue

 

 

Ashfield

474,401

507,839

Sharp

186,964

185,751

 

661,365

693,590

 

 

Operating profit before acquired intangible amortisation, transaction costs and exceptional items

 

 

Ashfield

63,206

58,596

Sharp

26,773

22,702

Adjusted operating profit

89,979

81,298

Amortisation of acquired intangibles

(16,024)

(16,830)

Transaction costs

(1,348)

(1,201)

Exceptional items

-

5,257

Operating profit

72,607

68,524

Finance income

451

2,065

Finance expense

(7,985)

(8,319)

 

 

 

Profit before tax

65,073

62,270

Income tax expense

(13,743)

(7,016)

Profit after tax for the period

51,330

55,254

       

 

Timing of revenue recognition

Six months ended 31 March 2021

 

 

Over time

$'000

Point in time

$'000

 

Total

$'000

Ashfield

 

 

 

Advisory & Health

225,967

-

225,967

Engage

246,650

1,784

248,434

Ashfield

472,617

1,784

474,401

Sharp

184,684

2,280

186,964

Group

657,301

4,064

661,365

 

 

 

Six months ended 31 March 2020

 

 

Over time

$'000

Point in time

$'000

 

Total

$'000

Ashfield

 

 

 

Advisory & Health

220,363

-

220,363

Engage

286,010

1,466

287,476

Ashfield

506,373

1,466

507,839

Sharp

184,622

1,129

185,751

Group

690,995

2,595

693,590

 

Revenue is recognised when a customer obtains control of a good or service and therefore has the ability to direct the use and obtain the benefits from the good or service. Revenue is recognised over time where i) there is a continuous transfer of control to the customer; or ii) there is no alternative use for any asset created and there is an enforceable right to payment for performance completed to date. Other revenue contracts are recognised at a point in time when control of the good or service transfers to the customer.

 

Geographical analysis of revenue

 

Six months

ended

31 March

2021

 

Six months

ended

31 March

2020

 

$'000

$'000

Republic of Ireland

2,019

2,696

United Kingdom

105,360

126,286

North America 

453,697

454,634

Rest of the World

100,289

109,974

 

661,365

693,590

 

4. Equity accounted investments

 

The Group's interest in its joint ventures and associates, all of which are unlisted, is set out below.

 

 

 

 

 

 

Joint ventures

Associate

Total

 

$'000

$'000

$'000

At 1 October 2020

12,153

38,163

50,316

Share of profit after tax

884

1,590

2,474

Translation adjustment

(601)

-

(601)

At 31 March 2021

12,436

39,753

52,189

         

 

5.  Exceptional items

 

Exceptional items are those which, in management's judgement, should be disclosed separately by virtue of their nature or amount. Such items are included within the Income Statement caption to which they relate and are separately disclosed in the notes to the Group Interim Financial Statements.

 

There were no exceptional items reported during the period.

 

 

 

Six months

ended

31 March

2021

 

Six months

ended

31 March

2020

 

 

$'000

$'000

Gain on disposal of subsidiary

 

-

5,257

Net exceptional items pre-tax

 

-

5,257

Exceptional tax credit

 

-

4,420

Tax effect of exceptional items

 

-

(41)

Net exceptional items after tax

 

-

9,636

 

In the prior period, the Group recognised $9.6 million of an exceptional gain after tax relating to a $5.2 million gain on the disposal of Ashfield Pharmacovigilance and $4.4 million credit on the remeasurement of current tax liabilities as a consequence of the resolution of a historic uncertain tax position.

 

6.  Finance income and expense

 

 

Six months

ended

31 March

2021

 

Six months

ended

31 March

2020

 

$'000

$'000

Finance income

 

 

Income arising from cash deposits

194

684

Fair value adjustments to guaranteed senior unsecured loan notes

-

172

Foreign currency gain on retranslation of guaranteed senior unsecured loan notes

208

1,179

Net finance income on defined benefit pensions

49

30

 

451

2,065

Finance expense

 

 

Interest on bank loans and other loans:

 

 

-wholly repayable within 5 years

(3,447)

(3,494)

-wholly repayable after 5 years

(1,691)

(926)

Interest on lease liabilities

(1,620)

(1,526)

Interest on overdrafts

(48)

(53)

Unwinding of discount on provisions

(971)

(969)

Fair value adjustments to fair value hedges

-

(172)

Fair value of cash flow hedges transferred to equity

(208)

(1,179)

 

(7,985)

(8,319)

Net finance expense

(7,534)

(6,254)

 

 

 

 

7.  Earnings per ordinary share

 

 

Six months

ended

31 March

2021

$'000

Six months

ended

31 March

2020

$'000

Profit attributable to owners of the parent

 

51,331

55,245

Adjustment for amortisation of acquired intangible assets (net of tax)

 

11,958

12,591

Adjustment for transaction costs (net of tax)

 

1,155

1,083

Adjustment for exceptional items (net of tax)

 

-

(9,636)

Adjusted profit attributable to owners of the parent

 

 

64,444

59,283

 

 

2021

2020

 

 

Number

Number

 

 

of shares

of shares

Weighted average number of shares

 

251,728,131

250,273,185

Number of dilutive shares under option

 

459,425

513,713

 

Weighted average number of shares, including share options

 

252,187,556

 

250,786,898

         

 

 

 

 

 

2021

 

2020

Basic earnings per share - $ cent

 

 

20.39

22.07

Diluted earnings per share - $ cent

 

 

20.35

22.03

Adjusted basic earnings per share - $ cent1

 

 

25.60

23.69

Adjusted diluted earnings per share - $ cent1

 

 

25.55

23.64

 

1 Adjusted profit attributable to owners of the parent in the six months ended 31 March 2021 is stated before the amortisation of acquired intangible assets ($12.0m, net of tax) and transaction costs ($1.2m, 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. A total of 1,785,894 (2020: 2,197,997) anti-dilutive share options have been excluded from the calculation of diluted earnings per share.

 

The average market value of the Company's shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the period.

 

8.  Property, plant and equipment

 

Land and buildings

Plant and equipment

Motor vehicles

Computer equipment

Assets under construction

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

At 1 October 2020

77,740

105,264

19

6,560

4,457

194,040

Additions in the period

426

15,062

-

1,615

2,137

19,240

Arising on acquisition

-

101

-

54

-

155

Depreciation

(2,199)

(7,458)

(4)

(1,745)

-

(11,406)

Disposals in period

(899)

(13)

-

(13)

-

(925)

Transfer to intangible assets

-

-

-

(136)

-

(136)

Reclassifications

2,604

(1,034)

-

264

(1,834)

-

Translation adjustment

1,819

233

-

113

18

2,183

At 31 March 2021

79,491

112,155

15

6,712

4,778

203,151

 

At 31 March 2021

 

 

 

 

 

 

Cost or deemed cost

122,618

215,356

68

27,149

4,778

369,969

Accumulated depreciation

(43,127)

(103,201)

(53)

(20,437)

-

(166,818)

Net book amount

79,491

112,155

15

6,712

203,151

 

9.  Movement in goodwill and intangible assets

 

 

 

Goodwill

 

Intangible

assets

 

$'000

$'000

At 1 October 2020

583,101

220,387

Investment in computer software

-

5,018

Amortisation of acquired intangible assets

-

(16,024)

Amortisation of computer software

-

(4,975)

Arising on acquisitions

34,628

9,435

Transfer from property, plant and equipment

-

136

Translation adjustment

15,406

6,728

At 31 March 2021

633,135

220,705

 

10.  Right of use assets

 

$'000

At 1 October 2020

88,334

Additions

7,032

Arising on acquisition

294

Depreciation

(9,404)

Termination of lease contracts

(180)

Modification of lease contracts

116

Translation adjustment

989

At 31 March 2021

87,181

 

11.  Other reserves

 

Cash flow

Share-based

Foreign

Treasury

Capital redemption

 

 

hedge

payment

exchange

shares

reserve

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

At 1 October 2020

(1,594)

17,136

(134,658)

(7,676)

347

(126,445)

Effective portion of cash flow hedges

(876)

-

-

-

-

(876)

Deferred tax on cash flow hedges

110

-

-

-

-

110

Share-based payment expense

-

4,319

-

-

-

4,319

Release from share-based payment reserve

-

(6,104)

-

-

-

(6,104)

Translation adjustment

-

-

23,754

-

-

23,754

At 31 March 2021

(2,360)

15,351

(110,904)

(7,676)

347

(105,242)

 

12.  Net debt

 

 As at

31 March 2021

As at

31 March 2020

As at

30 Sept

2020

 

$'000

$'000

$'000

Current assets

 

 

 

Cash at bank and short-term deposits

228,857

151,123

246,045

Derivative financial instruments

1,622

8,993

1,604

Non-current assets

 

 

 

Derivative financial instruments

12,081

21,639

13,138

Current liabilities

 

 

 

Interest-bearing loans and borrowings

(72)

(65,119)

(64)

Non-current liabilities

 

 

 

Interest-bearing loans and borrowings

(276,834)

(174,875)

(276,920)

Net debt

(34,346)

(58,239)

(16,197)

Current liabilities

 

 

Lease liabilities

(17,701)

(15,353)

(16,777)

Non-current liabilities

 

 

 

Lease liabilities

(84,512)

(83,515)

(86,962)

Net debt including lease liabilities

(136,559)

(157,107)

(119,936)

 

13.  Provisions

 

 

Deferred

contingent

consideration

$'000

 

 

Onerous leases

$'000

 

 

Restructuring and

other costs

$'000

 

Total

$'000

At 1 October 2020

90,870

257

10,232

101,359

Release to income statement

-

-

(66)

(66)

Arising on acquisition

13,654

-

-

13,654

Utilised during the period

(7,913)

(15)

(4,971)

(12,899)

Unwinding of discount

971

-

-

971

Translation adjustment

628

-

173

801

At 31 March 2021

98,210

     242

5,368

103,820

 

 

 

 

 

Non-current

68,116

-

1,665

69,781

Current

30,094

242

3,703

34,039

Total

98,210

242

5,368

103,820

 

In the prior year, the Group availed of the practical expedient on adoption of IFRS 16 Leases to rely on the assessment of whether leases are onerous applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The remaining onerous lease balance relates to a lease with a lease term of less than one year.

 

14. Business Combinations

 

The Group completed the acquisition of 100% of PHMR Limited ('PHMR') on 23 January 2021. PHMR is a U.K.-based market access consultancy business. PHMR is presented as part of the Ashfield operating segment and will strengthen the division's market access and real world evidence services.

 

The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of the above acquisition due to the recent acquisition date. Any amendments to these acquisition fair values within the 12-month timeframe from the date of acquisition will be disclosed in the 2021 Annual Report as stipulated by IFRS 3 Business Combinations.

 

 

Arising on

 

Acquisition

 

$'000

Property, plant and equipment

155

Right of use assets

294

Intangible assets - arising on acquisition

9,435

Trade and other receivables

1,198

Trade and other payables

(582)

Lease liabilities

(294)

Deferred tax liabilities

(1,868)

Corporation tax liabilities

300

Cash acquired

5,461

Net assets acquired

14,099

Goodwill

34,628

Consideration

48,727

 

Satisfied by:

 

Cash consideration

35,073

Deferred contingent consideration

13,654

Total consideration

48,727

Net cash outflow - arising on acquisitions

 

Cash consideration

35,073

Less: Cash and cash equivalents

(5,461)

Net cash outflow

29,612

 

 

 

The total transaction related costs for completed and aborted acquisitions amounts to $1,348,000. These are presented separately in the Group Income Statement.

 

Goodwill is attributable to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. The significant factors giving rise to the goodwill include the value of the workforce and management teams within the business acquired, the enhancement of the competitive position of the Group in the marketplace and the strategic premium paid by UDG Healthcare plc to create the combined Group. The goodwill arising from acquisitions that is expected to be tax deductible is $34,628,000.

 

The intangible assets arising on the acquisition primarily relate to the trade names, customer relationships, and customer contracts. The gross contractual value of trade and other receivables on acquisition amounted to $1,201,000. The fair value of trade and other receivables recognised on acquisition was $1,198,000. No contingent liabilities were recognised on the acquisition completed during the six month period ended 31 March 2021.

 

Contingent consideration is payable to the sellers of PHMR after two years, based on the achievement of certain performance measures. The fair value of contingent consideration recognised at the date of acquisition is calculated by discounting the expected future payments to present value at the acquisition date. For contingent consideration to become payable, the performance measures must be achieved by the acquired business. On an undiscounted basis, the future payments for which the Group may be liable in respect of the current period acquisition ranges from $nil to $13,654,000.

 

The Group's results for the six month period ended 31 March 2021 included the following amounts in respect of the business acquired during the period:

 

 

 

Six months

ended

31 March

2021

 

 

$'000

Revenue

 

1,278

Loss for the period

 

(113)

 

The proforma revenue and profit of the Group for the six month period ended 31 March 2021 would have been $663,921,000 and $51,104,000 respectively had the acquisition taken place at the start of the reporting period. The proforma results for the period include the estimate of tax expense and amortisation of intangible assets recognised on acquisition.

 

15.  Employee benefits

 

 

 

Employee

 

 

 

benefit

 

 

 

asset

 

 

 

$'000

Employee benefit asset at 1 October 2020

 

 

8,592

Current service cost

 

 

(1,852)

Interest

 

 

49

Contributions paid

 

 

894

Remeasurement gain

 

 

4,577

Translation adjustment

 

 

(45)

Employee benefit asset at 31 March 2021

 

 

12,215

 

As set out in the consolidated financial statements for the year ended 30 September 2020, the Group operates a number of defined benefit pension schemes which are funded by the payments of contributions to separately administered trust funds. The ROI schemes and U.S. scheme had remeasurement gains in the period arising from a change in the financial assumptions used to measure liabilities of the respective plans and a higher than expected returns on plan assets. In the ROI schemes, there is no longer a salary increase assumption due to the accrual of pension benefits ceasing from 1 December 2015.

 

The principal assumptions are as follows:

 

 

 

                          Republic of Ireland Schemes

 

             United States Scheme

 

As at

31 March

2021

As at

30 September

2020

As at

31 March

2021

As at

30 September

2020

Rate of increase in salaries

n/a

n/a

4.00%

4.00%

Rate of increase in pensions

0-1.60%

0-1.25%

0.00%

0.00%

Inflation rate

1.60%

1.25%

2.75%

2.75%

Discount rate

1.05%

0.85%

2.80%

2.40%

 

16. Financial instruments

The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed consolidated balance sheet at 31 March 2021, are as follows:

 

 

Carrying value

Fair value

 

 

$'000

$'000

Financial assets

 

 

 

Trade and other receivables

 

316,918

316,918

Derivative financial assets

 

13,703

13,703

Cash and cash equivalents

 

228,857

228,857

 

 

559,478

559,478

Financial liabilities

 

 

 

Trade and other payables

 

178,979

178,979

Interest-bearing loans and borrowings

 

276,906

284,458

Lease liabilities

 

102,213

102,213

Deferred contingent consideration

 

98,210

98,210

 

 

656,308

663,860

 

The fair values of the financial assets and liabilities disclosed in the above tables have been determined using the methods and assumptions set out below.

 

Trade and other receivables/payables

For receivables and payables the carrying value less impairment provision is deemed to reflect fair value, where appropriate.

 

Cash and cash equivalents

For cash and cash equivalents, the nominal amount is deemed to reflect fair value.

 

Interest-bearing loans and borrowings (excluding lease liabilities)

The fair value of interest-bearing loans and borrowings is based on the fair value of the expected future principal and interest cash flows discounted at interest rates effective at the balance sheet date and adjusted for movements in credit spreads.

 

Lease liabilities

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

 

Valuation techniques and significant unobservable inputs

Fair value hierarchy of assets and liabilities measured at fair value

The Group has adopted the following fair value hierarchy in relation to its financial instruments that are carried in the balance sheet at fair value as at the period end:

·      Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

·      Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices); and

·      Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table sets out the fair value of all financial assets and liabilities that are measured at fair value:

 

 

Level 1

Level 2

Level 3

  Total

 

   $'000

   $'000

   $'000

  $'000

Assets measured at fair value

 

 

 

 

Designated as hedging instruments

 

 

 

 

Cross currency interest rate swaps

-

13,703

-

13,703

 

-

13,703

-

13,703

 

 

 

 

 

 

Liabilities measured at fair value

 

 

 

 

At fair value through profit or loss 

 

 

 

 

Deferred contingent consideration

-

-

98,210

98,210

 

-

-

98,210

98,210

 

 

 

 

 

Summary of derivatives:

 

 

Amount of financial assets/liabilities as presented in the balance sheet

$'000

 

Related amounts not offset in the

 balance sheet

$'000

 

 

 

31 March 2021

Net

$'000

 

 

Amount of financial assets/liabilities as presented in the balance sheet

$'000

 

 

Related amounts not offset in the balance sheet

$'000

 

 

 

31 March 2020

Net

$'000

Derivative financial assets

13,703

-

13,703

30,632

-

30,632

Derivative financial liabilities

-

-

-

-

-

-

 

All derivatives entered into by the Group are included in Level 2 of the fair value hierarchy and consist of cross currency interest rate swaps. The fair values of cross currency interest rate swaps are calculated as the present value of the estimated future cash flows based on the terms and maturity of each contract and using forward currency rates and market interest rates as applicable for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument and include, where appropriate, adjustments to take account of the credit risk of the Group entity and counterparty.

 

Deferred contingent consideration

Deferred contingent consideration is included in Level 3 of the fair value hierarchy. Details of movements in the period are included in Note 13. The deferred contingent consideration liability arises from acquisitions completed by the Group. The fair value is determined considering the expected payment, discounted to present value using a risk-adjusted discount rate. The expected payment is determined separately in respect of each individual earn out agreement taking into consideration the expected level of profitability of each acquisition. The provision for deferred contingent consideration is in respect of acquisitions completed during financial years 2018 to 2021. 

 

The significant unobservable inputs are:

·      forecasted weighted average EBIT growth rate 10.0% (2020: 14.6%); and

·      risk adjusted discount rate 0.0% - 2.8% (2020: 0.7% - 2.8%).

 

Inter-relationship between significant unobservable inputs and fair value measurement:

The estimated fair value would increase/(decrease) if:

·      the EBIT growth rate was higher/(lower); and

·      the risk adjusted discount rate was lower/(higher).

   

For the fair value of deferred contingent consideration, a reasonable possible change to one of the significant unobservable inputs at 31 March 2021, holding the other inputs constant, would have the following effects:

 

 

Increase

Decrease

 

$'000

$'000

Effect of change in assumption on income statement

 

 

 

Annual EBIT growth rate (1% movement)

113

(1,885)

Risk-adjusted discount rate (1% movement)

(926)

1,260

 

Financial ratios

Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times.

 

 

 

 

 

 

31 March 2021

Times

31 March

2020

Times

Net debt to annualised EBITDA

 

 

 

 

0.2

0.3

Annualised EBITDA interest cover

 

 

 

 

21.2

27.2

 

The financial ratios calculated above exclude the impact of IFRS 16, in line with financial covenant requirements.

 

17.  Dividends

The Board has not proposed an interim dividend in 2021 (2020 interim dividend: 4.46 $ cent, amounting to $11,197,000). During the first half of the financial year, the final dividend for 2020 (12.54 $ cent per share) was paid, giving rise to a reduction in shareholders' funds of $31,545,000.

 

18.  Foreign currency

The principal exchange rates used in translating sterling and euro balance sheets and income statements were as follows:

 

31 March

31 March

 

2021

2020

 

$1=Stg£

$1=Stg£

Balance sheet (closing rate)

0.7267

0.8091

Income statement (average rate)

0.7415

0.7797

 

 

 

 

$1=Euro€

$1=Euro€

Balance sheet (closing rate)

0.8529

0.9127

Income statement (average rate)

0.8342

0.9051

 

19. Related parties                                                                                                                       

The Group trades in the normal course of business with its equity accounted investments. 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, an associate of the Group, gross of interest, of Stg£12,370,000 (2020: Stg£11,958,000).

 

IAS 24 Related Party Disclosures requires the disclosure of compensation paid to the Group's key management personnel. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. UDG Healthcare classifies directors, the Company Secretary and members of its executive team as key management personnel. This executive team is the body of senior executives that formulates business strategy along with the directors, follows through on the implementation of that strategy and directs and controls the activities of the Group on a day to day basis.

 

Key management personnel receive compensation in the form of short-term employee benefits, post-employment benefits and equity compensation benefits. Key management personnel received total compensation of $7,993,000 for the six months ended 31 March 2021 (2020: $4,466,000).

 

20.  Events after the balance sheet date

 

In April 2021, the Group completed the acquisition of Nuvera Life Science Consulting LLC ('Nuvera') for consideration of up to $36 million comprising initial consideration of $24 million and an additional contingent consideration of up to $12 million over three years. Nuvera is a U.S.-based patient solutions consultancy focused on the rare disease and speciality therapeutic markets. Nuvera will be presented as part of the Ashfield operating segment. 

 

Due to the short time frame between completion date and the date of issuance of this report, an initial assignment of fair values to identifiable assets and liabilities acquired has not been completed.

 

Shareholders are referred to today's announcement of a recommended cash offer for the entire issued and to be issued share capital of UDG Healthcare plc by Nenelite Limited (a newly incorporated company and affiliate of Clayton, Dublier  & Rice LLP, formed for Clayton, Dublier  & Rice LLP,  in its capacity as adviser to Clayton, Dublier & Rice LLC as manager of CD&R Funds X and XI)).

 

21.  Board approval

This interim report was approved by the Board of Directors of UDG Healthcare plc on 11 May 2021.

 

 

Additional Information in Relation to the Group Profit Forecast

 

Group Profit Forecast

The statement made in this announcement in relation to expected performance for the year ending 30 September 2021 under the heading " Group Outlook" ("the Group Profit Forecast") constitutes a profit forecast for the purpose of Rule 28 of the Irish Takeover Rules.

 

The Group Profit Forecast was contained in the First Quarter Trading Update announcement issued on 26 January 2021 and is unchanged, save for an adjustment to reflect the benefit of the acquisition of Nuvera, also announced today.

 

Basis for preparation

The Group's Directors prepared the Group Profit Forecast on the basis of the unaudited consolidated accounts for the three months ended 31 December 2020 and a forecast outcome for the remainder of the financial year ending 30 September 2021.

 

The Group's Directors prepared the Group Profit Forecast on the basis of the following assumptions. Of these assumptions, those referred to in paragraph (v) to (viii) are outside the influence or control of the Group's Directors:

 

(i)         Expectations of constant currency adjusted operating profit growth of between 12% and 14% (previously 11% and 13%) ahead of the $165.3m reported in FY20 and expectations of constant currency adjusted diluted earnings per share (EPS) growth of between 10% and 12% (previously 9% and 11%) ahead of the  47.71 $ cent reported in FY20;

 

(ii)        other than the acquisitions announced today, there being no further acquisitions or disposals by the Group in the year ending 30 September 2021 and the Group not entering into or terminating any partnerships or joint ventures in the period ending 30 September 2021;

 

(iii)          there being no material changes to the Group's existing capital structure (including share repurchases or issuances), operational strategy or business model in the period ending 30 September 2021;

 

(iv)       there being no material change to the Group's cost base and capital expenditures in the period ending 30 September 2021;

 

(v)       there being no business disruption or significant increase in economic uncertainty as a result of the COVID-19 pandemic or any other event, including an act of terrorism, natural disaster, cyber-attack or change in political regime, which results in significant disruption to the Group's business;

 

(vi)        there being no changes beyond those already contemplated in general trading conditions, global macroeconomic conditions, competitive environment or levels of demand in the countries in which the Group operates or trades which would materially affect the Group's business, including as a result of further increase COVID-19 related restrictions;

 

(vii)       there being be no changes in interest rates, bases of taxes, legislative or regulatory requirements or changes in the position of any regulatory body that would have a material impact on the Group's operations, expenditure or accounting policies; and

 

(viii)        there being no material adverse outcome from any ongoing or future disputes with any trading partner, competitor, regulator or tax authority.

 

The Group Profit Forecast does not take into account any effects of the proposed acquisition of the Group by Nenelite Limited (including the costs associated with the proposed acquisition).

 

The Group's Directors' confirmation

The Group's Directors have considered the Group Profit Forecast and confirm that it remains valid,  has been properly compiled on the basis set out above and that the basis of accounting used is consistent with the Group accounting policies, which are in accordance with IFRS and are those that the Group will apply in preparing its Annual Report and Financial Statements for the year ending 30 September 2021.

Additional Information

Key performance indicators and non-IFRS performance measures

 

The Group reports certain financial measurements that are not required under International Financial Reporting Standards (IFRS) which represent the generally accepted accounting principles (GAAP) under which the Group reports. The Group believes that the presentation of these non-IFRS measurements provides useful supplemental information which, when viewed in conjunction with IFRS financial information, provides stakeholders with a more meaningful understanding of the underlying financial and operating performance of the Group and its divisions. These measurements are also used internally to evaluate the historical and planned future performance of the Group's operations and to measure executive management's performance based remuneration.

 

None of the non-IFRS measurements should be considered as an alternative to financial measures derived in accordance with IFRS. The non-IFRS measurements can have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of results as reported under IFRS. The principal non-IFRS measurements used by the Group, together with reconciliations where the non-IFRS measures are not readily identifiable from the Financial Statements, are set out below.

 

Net revenue

 

Definition

This comprises of revenue as reported in the Group Income Statement, adjusted for revenue associated with pass-through costs for which the Group does not earn a margin.

 

Calculation

 

 

Six months ended

 31 March

 2021

$'000

Six months ended

 31 March

2020

$'000

Revenue

Income Statement

 

661,365

693,590

Pass - through revenue  

 

 

(52,343)

(97,416)

Net revenue

 

 

609,022

596,174

 

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).

 

Calculation

 

 

Six months

ended

 31 March

 2021

$'000

Six months

ended

 31 March

2020

$'000

Operating profit

Income Statement

 

72,607

68,524

Transaction costs

Income Statement

 

1,348

1,201

Amortisation of acquired intangible assets

Note 9

 

16,024

16,830

Exceptional items

Note 5

 

-

(5,257)

Adjusted operating profit

 

 

89,979

81,298

 

Adjusted profit before tax

 

Definition

This comprises of profit before tax as reported in the Group Income Statement before amortisation of acquired intangible assets, transaction costs and exceptional items (if any).

 

Calculation

 

 

Six months

ended

 31 March

 2021

$'000

Six months

ended

 31 March

2020

$'000

Profit before tax

Income Statement

 

65,073

62,270

Transaction costs

Income Statement

 

1,348

1,201

Amortisation of acquired intangible assets

Note 9

 

16,024

16,830

Exceptional items

Note 5

 

-

(5,257)

Adjusted profit before tax

 

 

82,445

75,044

 

Adjusted operating margin

 

Definition

Measures the adjusted operating profit as a percentage of revenue.

 

Calculation

 

 

 

Six months

ended

 31 March

 2021

$'000

Six months

ended

 31 March

2020

$'000

Adjusted operating profit

Per above

 

89,979

81,298

Revenue

                         Income Statement

 

661,365

693,590

Adjusted operating margin

 

 

13.6%

11.7%

 

Adjusted net operating margin

 

Definition

Measures the adjusted operating profit as a percentage of net revenue.

 

Calculation

 

 

 

Six months

ended

 31 March

 2021

$'000

Six months

ended

 31 March

2020

$'000

Adjusted operating profit

Per above

 

89,979

81,298

Net revenue

Per above

 

609,022

596,174

Adjusted net operating margin

 

 

14.8%

13.6%

 

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.

 

 

Calculation

 

Six months ended

 31 March

2021

$'000

Six months ended

 31 March

2020

$'000

Tax charge

Income Statement

13,743

7,016

Tax relief with respect to transaction costs

 

193

118

Deferred tax credit with respect to acquired intangible amortisation

 

4,066

4,239

Tax relief with respect to exceptional items

Note 5

-

(41)

Remeasurement of current tax liabilities

Note 5

-

4,420

Income tax expense before exceptional, transaction costs and deferred tax attaching to amortisation of acquired intangible assets

 

18,002

15,752

Adjusted profit before tax

Per above

82,445

75,044

Adjusted effective tax rate

 

21.8%

21.0%

 

Adjusted and annualised EBITDA

 

Definition

Adjusted EBITDA is used internally for performance management and is also a useful supplemental measure for external stakeholders. Adjusted EBITDA is adjusted operating profit (operating profit before amortisation of acquired intangible assets, transaction costs and exceptional items) before depreciation, share-based payment expense, amortisation of computer software, the share of equity accounted investments' profits/(loss) and profit/(loss) on disposal of property, plant and equipment.

 

The annualised EBITDA used for debt covenant compliance purposes, amends adjusted EBITDA to include the annualisation of the EBITDA for acquisitions and exclude share-based payment expense, transaction costs, the impact of IFRS 16 Leases on EBITDA and the EBITDA of completed disposals.

 

Adjusted and annualised EBITDA are adjusted for depreciation of right of use assets as the expense is considered by management to be similar in nature to depreciation of property, plant and equipment and amortisation of intangible assets. Annualised EBITDA excluding IFRS 16 is also presented (excluding depreciation of right of use assets and IFRS 16 operating profit impact) to illustrate an annualised EBITDA that is consistent with the Group's financial debt covenants.

 

 

Calculation

6 months ended

31 March 2021

$'000

6 months ended

31 March 2020

$'000

12months ended

31 March 2021

$'000

12 months ended

31 March

2020

$'000

Adjusted operating profit

Per above

89,979

81,298

173,993

170,536

Share-based payment expense

Cash Flow Statement

4,319

2,628

7,290

4,827

Depreciation

Cash Flow Statement

11,406

11,331

22,916

22,697

Depreciation of right of use assets

Cash Flow Statement

9,404

8,128

18,438

8,128

Amortisation of computer software

Note 9

4,975

4,694

9,666

9,064

Share of equity accounted investments' profit after tax

Note 4

 

(2,474)

(954)

 

(3,892)

(1,422)

Profit on disposal of property, plant and equipment

Cash Flow Statement

 

(456)

(26)

 

(272)

80

Adjusted EBITDA

 

117,153

107,099

228,139

213,910

Share-based payment expense

 

 

 

(7,290)

(4,827)

Transaction costs

 

 

 

(2,211)

(2,524)

EBITDA of completed disposals

 

 

 

-

(287)

Annualised EBITDA of acquisitions1

 

 

 

3,060

4,059

Annualised EBITDA       221,698 210,331
IFRS 16 Operating profit impact       (1,220) (766)
Depreciation of right of use assets       (18,438) (8,128)

IFRS 16 impact on EBITDA of completed disposals

 

 

 

-

70

IFRS 16 impact on Annualised EBITDA of acquisitions

 

 

(11)

(105)

Annualised EBITDA excluding IFRS 16

 

 

202,029

201,402

 

1 Includes EBITDA for acquisitions which were not part of the Group for the full financial period.

 

Financial ratios

 

Definition

The net debt to EBITDA and EBITDA interest cover ratios disclosed are calculated using annualised EBITDA and adjusted net finance expense (net finance expense excluding interest on pension scheme obligations and the unwinding of discount on provisions and deferred consideration, see Note 6). 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 12.

 

Return on capital employed (ROCE)                                            

 

Definition

ROCE is the adjusted operating profit expressed as a percentage of the Group's net assets employed. Net assets employed is the average of the opening and closing net assets in the period excluding net debt adjusted for the historical amortisation of acquired intangible assets and restructuring charges.

 

 

$'000

 

 

As at

31 March

2021

$'000

 

As at

31 March

2020

$'000

Net assets

Balance Sheet

 

1,035,021

945,303

Net debt

Note 12

 

34,346

58,239

Assets before net debt

 

 

1,069,367

1,003,542

Cumulative intangible amortisation

 

 

238,230

226,527

Cumulative restructuring costs

 

 

27,394

20,632

Total capital employed

 

 

1,334,991

1,250,701

 

 

 

 

 

Average total capital employed 

 

 

1,292,846

1,211,522

Rolling 12 month adjusted operating profit

 

 

173,993

170,536

Return on capital employed

 

 

13.5%

14.1%

 

Free cashflow conversion

 

Definition

 

Free cash flow conversion is the adjusted EBITDA, less working capital movement and less capital expenditure on property,

plant and equipment and computer software, expressed as a percentage of adjusted EBITDA.

 

 

Calculation

 

 

As at

31 March

2021

$'000

 

As at

31 March

2020

$'000

Adjusted EBITDA

Per above

 

117,153

107,099

Working capital

Cash Flow Statement

 

1,473

20,298

Investment in property, plant and equipment

Cash Flow Statement

 

(23,553)

(19,315)

Investment in intangible assets - computer software

Cash Flow Statement

 

(5,579)

(3,826)

Cash generated from operations including capital expenditure

 

 

89,494

104,256

Free cash flow conversion

 

 

76.4%

97.3%

           

 

Constant currency

 

Definition

The translation of foreign denominated earnings can be impacted by movements in foreign exchange rates versus U.S. dollars, the Group's presentation currency. In order to present a better reflection of underlying performance in the period, the Group retranslates foreign denominated prior period earnings at current period exchange rates.

 

 

 

Six months ended 31 March 2021

 

Six months ended 31 March 2020

Revenue - constant currency

 

 

$'000

$'000

Revenue

Income Statement

661,365

693,590

Currency impact

 

-

14,576

Revenue - constant currency

 

661,365

708,166

Revenue - constant currency decrease on H1 2020

 

(46,801)

 

Revenue - constant currency decrease on H1 2020 %

 

(7%)

 

 

Net revenue - constant currency

 

$'000

$'000

Net revenue

Per above

609,022

596,174

Currency impact

 

-

12,077

Net revenue - constant currency

 

609,022

608,251

Net revenue - constant currency increase on H1 2020

 

771

 

Net revenue - constant currency increase on H1 2020 %

 

0%

 

 

 

 

 

Adjusted operating profit - constant currency

 

$'000

$'000

Adjusted operating profit

Per above

89,979

81,298

Currency impact

 

-

182

Adjusted operating profit - constant currency

 

89,979

81,480

Adjusted operating profit - constant currency increase on 2020

 

8,499

 

Adjusted operating profit - constant currency increase on 2020 %

 

10%

 

 

Adjusted profit before tax - constant currency

 

$'000

$'000

Adjusted profit before tax

Per above

82,445

75,044

Currency impact

 

-

(163)

Adjusted profit before tax - constant currency

 

82,445

74,881

Adjusted profit before tax - constant currency increase on 2020

 

7,564

 

Adjusted profit before tax - constant currency increase on 2020 %

 

10%

 

 

 

 

 

Adjusted diluted earnings per share ('EPS') - constant currency

 

$'000

$'000

Adjusted profit attributable to owners of the parent                                   

 Note 7

 

64,444

59,283

Currency impact

 

-

(129)

Adjusted profit attributable to owners of the parent - constant currency

 

64,444

59,154

Weighted average number of shares used in diluted EPS calculation

Note 7

252,187,556

250,786,898

Adjusted diluted EPS - constant currency (cent)

 

25.55

23.59

Adjusted diluted EPS - constant currency increase on 2020 (cent)

 

1.96

 

Adjusted diluted EPS - constant currency increase on 2020 %

 

8%

 

 

 

 

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