Healthcare advisory, communications and packaging group UDG Healthcare (UDG) suspended its dividend and furloughed employees to preserve cash as prepares for a tough second-half year to 30 September 2020. The shares dropped almost 10% to 566.7p.
COST CONTROL
The company has taken measures to reduce variable costs including a freeze on recruitment and a temporary reduction in working hours while the board and senior management team have taken a 20% reduction in base salaries and fees for the next three-months.
The balance sheet showed net debt of $105m at the year ended 30 September and management said its net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) was 0.3 times at 31 March 2020, which implies an improved position over the first half of 2020.
More financial details will be provided at the full interim results on 21 May, but given the uncertainty around when the current lockdowns will be lifted, broker Numis has trimmed its forecasts for full-year operating profit by around 8% to a range of €150m-to-€160m.
STRONG START NOT SUSTAINABLE
First-half trading to 31 March 2020 would have seen very little impact from the recent lock-downs across Europe, and the company indicated constant currency pre-tax profit is ‘well ahead’ of the prior year of $62m, reflecting organic growth and acquisitions made in 2019.
Management expects to see lower activity levels over the remainder of 2020, and has removed the financial guidance for constant currency earnings per share which it provided on 28 January, when it was looking at growth of between 7%-to-9%.