1 UDG Healthcare plc Interim Report 2016 Another period of strong growth 19 May 2016: UDG Healthcare plc (“UDG Healthcare” or “Group”), a leading international healthcare services provider, announces its results for the six months to 31 March 2016 after another period of financial and strategic progress for the Group. IFRS based Adjustments 1 Adjusted Constant currency increase on 2015 Increase on 2015 €'m €'m €'m % % Continuing operations Revenue 472.4 - 472.4 2 6 Operating profit 40.3 8.1 48.4 9 15 Profit before tax 33.1 8.1 41.2 10 18 Diluted earnings per share (cent) 9.86 2.91 12.77 8 15 Discontinued operations 2 Profit after tax 7.0 4.0 11.0 10 10 Diluted earnings per share (cent) 2.82 1.64 4.46 8 9 Total diluted earnings per share (cent) 12.68 4.55 17.23 8 13 Dividend per share (cent) 3.05 - 3.05 5 5 31 March 2016 30 September 2015 31 March 2015 Net debt (€’m) 228.0 195.8 274.9 Net debt/EBITDA 3 (times) 1.63 1.42 2.02 Non-GAAP information The Group reports certain financial measures 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 measures 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 measures are also used internally to evaluate the historical and planned future performance of the Group’s operations and to measure executive management’s performance based remuneration. Reference to these performance measurements throughout this report are to the adjusted measurements unless otherwise stated. 1 Adjusted operating profit, profit before tax and diluted EPS from continuing operations are stated before the amortisation of acquired intangible assets (€7.3m, pre-tax) and transaction costs (€0.8m, pre-tax). Adjusted profit after tax from discontinued operations is stated after charging depreciation and amortisation of assets classified as held for sale (€3.5m, net of tax) and adding back transaction costs (€7.5m, net of tax). Profit after tax in the comparative period reflected a depreciation and amortisation charge of €3.6m, net of tax, relating to assets forming part of the discontinued operations. Under IFRS, depreciation and amortisation are not charged on assets classified as held for sale, therefore, no equivalent depreciation and amortisation has been charged on these assets in the current period’s results. To provide comparable information on the performance of the discontinued operations, an estimated charge of €3.5m (net of tax) for depreciation and amortisation in the current period has been reflected in the adjustments column above. 2 The discontinued operations include United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. These operations were included in the Group’s proposed disposal which was announced on 18 September 2015 and completed on 1 April 2016. 3 EBITDA of continuing and discontinued operations before any exceptional items and transaction costs for the preceding twelve months, including annualised EBITDA of companies acquired and less EBITDA of completed disposals. There were no exceptional items, acquisitions or disposals in H1 2016.
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UDG Healthcare plc Interim Report 2016
Another period of strong growth
19 May 2016: UDG Healthcare plc (“UDG Healthcare” or “Group”), a leading international healthcare services provider, announces its results for the six months to 31 March 2016 after another period of financial and strategic progress for the Group.
IFRS based
Adjustments1
Adjusted
Constant currency
increase on 2015
Increase on 2015
€'m €'m €'m % % Continuing operations
Revenue 472.4 - 472.4 2 6
Operating profit 40.3 8.1 48.4 9 15
Profit before tax 33.1 8.1 41.2 10 18
Diluted earnings per share (cent) 9.86 2.91 12.77 8 15
Discontinued operations2
Profit after tax 7.0 4.0 11.0 10 10
Diluted earnings per share (cent) 2.82 1.64 4.46 8 9
Total diluted earnings per share (cent) 12.68 4.55 17.23 8 13
Dividend per share (cent) 3.05 - 3.05 5 5
31 March 2016
30 September 2015
31 March
2015
Net debt (€’m) 228.0 195.8 274.9
Net debt/EBITDA3 (times) 1.63 1.42 2.02
Non-GAAP information The Group reports certain financial measures 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 measures 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 measures are also used internally to evaluate the historical and planned future performance of the Group’s operations and to measure executive management’s performance based remuneration. Reference to these performance measurements throughout this report are to the adjusted measurements unless otherwise stated.
1 Adjusted operating profit, profit before tax and diluted EPS from continuing operations are stated before the amortisation of acquired intangible assets (€7.3m, pre-tax) and transaction costs (€0.8m, pre-tax). Adjusted profit after tax from discontinued operations is stated after charging depreciation and amortisation of assets classified as held for sale (€3.5m, net of tax) and adding back transaction costs (€7.5m, net of tax). Profit after tax in the comparative period reflected a depreciation and amortisation charge of €3.6m, net of tax, relating to assets forming part of the discontinued operations. Under IFRS, depreciation and amortisation are not charged on assets classified as held for sale, therefore, no equivalent depreciation and amortisation has been charged on these assets in the current period’s results. To provide comparable information on the performance of the discontinued operations, an estimated charge of €3.5m (net of tax) for depreciation and amortisation in the current period has been reflected in the adjustments column above. 2 The discontinued operations include United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. These operations were included in the Group’s proposed disposal which was announced on 18 September 2015 and completed on 1 April 2016. 3 EBITDA of continuing and discontinued operations before any exceptional items and transaction costs for the preceding twelve months, including annualised EBITDA of companies acquired and less EBITDA of completed disposals. There were no exceptional items, acquisitions or disposals in H1 2016.
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Chief Executive’s comment
Commenting on the interim performance, UDG Healthcare plc Chief Executive Officer, Brendan McAtamney said:
“The Group’s continuing business delivered another period of strong growth during H1 2016. Profit before tax increased by 18% (10% on a constant currency basis) and earnings per share increased by 15% (8% on a constant currency basis) due to a combination of robust underlying growth and the benefit of currency movements. Sharp’s operating profit increased by 38% during the period while Ashfield increased operating profit by 7%. The continuing Group operating margin increased from 9.4% to 10.2%, with each division increasing its operating margin during the period. We are reiterating our full year market guidance of 6-8% EPS1 growth for the continuing Group on a constant currency basis. The Group’s activities and strategy continue to be supported by the strong growth outlook for the outsourced healthcare services market. Following the completion of the disposal of the United Drug Supply Chain businesses and MASTA in April, the Group is now in a net cash position. Underpinned by our strong balance sheet and diversified client base, UDG Healthcare remains well positioned to continue to execute our international expansion strategy and meet the growing demand for our specialist services from our global healthcare clients.”
Financial highlights (continuing Group only)
Adjusted operating profit1 growth of 15% (9% on a constant currency basis) to €48.4 million, with profit
before tax1 up 18% (10% on a constant currency basis).
Adjusted diluted earnings per share1 (EPS) from continuing operations increased by 15% (8% on a constant
currency basis).
Revenue up 6%. Net revenue up 9% compared to prior period on a constant currency basis, excluding pass-
through costs and adjusting for disposals.
Operating margin1 increased from 9.4% to 10.2%. Net operating margin2 increased from 11.1% to 11.6%.
5% increase in interim dividend to 3.05 cent per share.
Reiterating our full year market guidance of 6-8% EPS growth for the continuing Group on a constant
currency basis.
Strategic & operating highlights
Disposal of the United Drug Supply Chain businesses and MASTA completed on 1 April 2016.
Ashfield’s operating profit increased by 7% (underlying growth of 7%), with positive underlying growth
evident across the division.
The Group acquired Pegasus Public Relations Limited in April 2016, for an initial consideration of Stg£10.1
million with an additional Stg£6.7 million payable, based on the achievement of agreed profit targets over
the next three years. Pegasus is a UK-based healthcare communications business, complementing the
existing services provided by Ashfield Healthcare Communications.
Sharp Packaging’s operating profit increased by 38% (underlying growth of 25%) driven by continued strong
momentum in the US business.
Sharp US’ capacity expansion has been completed providing an additional 30% capacity once fully
validated.
The Group’s Supply Chain Services businesses (including discontinued operations) traded in line with
expectations.
1 Before the amortisation of acquired intangible assets and transaction costs. 2 Operating margin as a percentage of net revenue. Net revenue represents gross revenue adjusted for revenue associated with pass-
through costs for which the Group does not earn a margin.
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Group development and outlook
The Group reiterates its full year guidance for constant currency adjusted diluted EPS1 growth for the continuing Group of 6 - 8% based on both the current momentum and positive outlook for the remainder of 2016. EPS guidance is unchanged because the positive impact from the acquisition of Pegasus is offset by the impact of allocating an extra three months central administration costs to the continuing Group in 2016, due to the earlier than expected completion of the disposal of the United Drug Supply Chain businesses and MASTA. The Group is now in a net cash position after the receipt of the disposal proceeds in April from the sale of the United Drug Supply Chain businesses and MASTA. To complement the underlying profit growth being generated by the businesses, the Group remains active from a corporate development perspective. The Group’s focus will continue to be on executing strategic M&A opportunities complementary to our market leading, high-growth businesses, Ashfield and Sharp. The build and fit out of Sharp’s new packaging facility in Allentown, Pennsylvania was completed in April 2016, and the first phase of packaging suites will become operational during the second half of 2016. Once fully validated and operational, the investment at this site will increase US commercial packaging capacity by approximately 30%. The Group remains focused on ensuring that scalable infrastructure is in place to support the future organic and acquisition led growth of the business, through its “Future Fit” initiatives. The first phase of this project will incorporate the implementation of a Groupwide Human Resource Information System, which is anticipated to go live during the second half of 2017 with a total capital investment of €12 million. Further projects will be focused on the Group’s finance and IT infrastructure. The average 2015 financial year exchange rates were €1 = £0.7428 and $1.1482. The average exchange rates during H1 2016 were €1 = £0.7456 and $1.0986 (H1 2015 €1 = £0.7670 and $1.1899). As previously guided, the Group expects to continue its long history of dividend growth in FY16. The Board has declared an interim dividend of 3.05 cent per share, a 5% increase on the 2015 interim dividend. Preliminary results: The Group will issue preliminary results for the year to 30 September 2016 on Thursday, 24 November 2016. 1 before the amortisation of acquired intangible assets and transaction costs.
Analyst presentation: A presentation for investors and analysts will be held at the London Stock Exchange at 9.00 GMT today, Thursday, 19 May 2016. If you wish to attend, please contact Powerscourt. Alternatively, to dial into the conference call or webcast, the details are as follows: Audio webcast http://edge.media-server.com/m/p/3w8qtbpi Conference call UK number: + 44-203-427-1907 Ireland number: + 353-1-246-5601 US number: + 1-212-444-0412 Participant code: 9775904 If you wish to ask questions, please do so via the conference call. A replay of the audio webcast can be accessed via the same webcast link above.
Review of Operations for the six months to 31 March 2016
Ashfield Commercial & Medical Services1
Six months to 31 March 2016 2015 Change
€’m €’m
Gross revenue
UK 126.2 125.0 1%
North America 94.5 89.6 5%
Europe 70.5 69.0 2%
Total gross revenue 291.2 283.6 3%
Net revenue 2
UK 98.3 97.4 1%
North America 77.1 60.9 27%
Europe 60.5 56.5 7%
Total net revenue 235.9 214.8 10%
Operating profit
UK (incl Japan) 15.8 14.2 11%
North America 7.4 7.6 (3%)
Europe 4.8 4.4 9%
Total operating profit 28.0 26.2 7% Operating margin
Operating margin (on gross revenue) 9.6% 9.2%
Net operating margin (on net revenue) 11.9% 12.2% 1 Excludes MASTA in 2016 and 2015 as it was included in the proposed disposal announced on 18 September 2015 and completed on 1
April 2016. 2 Net revenue represents gross revenue adjusted for revenue associated with pass-through costs for which the Group does not earn a
margin. There are no pass-through costs in Sharp Packaging Services or Supply Chain Services.
Trading across the Ashfield division was good, with H1 2016 net revenue up 10% to €235.9m and operating profit up 7% to €28.0m. Adjusting for the benefit of favourable currency movements and the impact of the 2015 disposal of the non-core Speaker Bureau business, Ashfield generated underlying operating profit growth of 7% during the period. Operating margin in the period was 9.6%, whilst net operating margin (allowing for pass-through costs) was 11.9%. UK operating profit increased by 11% and net operating margin by 152bps during the period. This was primarily due to continued good progress in healthcare communications and an increased contribution from the Japanese joint venture, offsetting a weaker performance from the UK commercial business which operates in a more mature market. Reported operating profit for North America was 3% behind the prior period. Adjusting for the impact of the disposal of the Speaker Bureau business during 2015, operating profit in North America grew by 15% during the period including the benefit of favourable currency movements. European operating profit increased by 9% during H1 2016 with a net operating margin of 7.9%.
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Sharp Packaging Services
Six months to 31 March 2016 2015 Change
€’m €’m
Revenue US 108.2 84.7 28%
EU 24.2 25.7 (6%)
Total revenue 132.4 110.4 20%
Operating profit/(loss) US 16.5 12.0 38%
EU (0.3) (0.3) -
Total operating profit 16.2 11.7 38%
Operating margin
12.2% 10.6%
Sharp Packaging Services continued its strong financial performance during H1 2016 with revenue increasing by 20% to €132.4m and operating profit up 38% to €16.2m. The division generated underlying constant currency operating profit growth of 25% and benefited from favourable currency movements during the period. Operating margin increased significantly (+163bps) to 12.2% during the period. The Sharp US business continued to deliver strong growth. Revenue increased by 28% compared to the prior period, while operating profit increased by 38% to €16.5m due to continued strong market demand dynamics across all packaging formats. Operating margin in the US increased to 15.2% (+111bps) driven by continued high utilisation rates. The build and fit out of the new biotech packaging facility at our Allentown campus in Pennsylvania has been completed. This will provide an additional 30% capacity for the US commercial packaging business once fully validated. The first phase of packaging suites is becoming operational and this additional capacity will allow the business to meet the growing market demand which is evident across all packaging formats in the US business. The Group anticipates that further capacity investments may be required into the medium term to meet growing client demand. Sharp Europe continues to trade close to a breakeven position. Despite a realignment of the cost base and improved business development efforts, the European packaging business continues to have capacity in excess of current requirements. Addressing this excess capacity remains a key priority for the business. Demand for serialisation services continues to increase. We continue to invest in serialisation capabilities in advance of the regulatory requirement for prescription products to be serialised from November 2017 in the US and Europe in 2019. We have now enabled over 40% of our packaging lines with serialisation capability and have worked on over 30 serialisation projects with existing clients. We will continue to enable the remainder of the US prescription packaging lines over the coming twelve months to ensure the business is fully prepared to meet our clients’ serialisation requirements.
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Supply Chain Services (continuing)1
Six months to 31 March 2016 2015 Change
€’m €’m
Revenue 48.8 52.2 (7%)
Operating profit 4.2 4.1 2%
Operating margin 8.6% 7.8%
1 Excludes United Drug Supply Chain Services, United Drug Sangers and TCP Group in 2016 and 2015 as they were included in the
proposed disposal announced on 18 September 2015 and completed on 1 April 2016.
Continuing operations include Aquilant and the joint venture with Medicare. Revenue was 7% behind the prior period, however, adjusting for the closure of Aquilant’s UK laboratory distribution business in February 2015, underlying revenue was in line with the prior period. Operating profit was 2% ahead of the prior period and operating margin increased to 8.6%. Aquilant renewed a number of important client contracts during the period and continues to trade in line with expectations.
Discontinued operations
Six months to 31 March 2016 2015 Change
€’m €’m
Revenue 682.9 685.2 (0%)
Profit after tax2 11.0 10.0 10%
2 Profit after tax from discontinued operations is stated before amortisation of acquired intangible assets, transaction costs and exceptional
items. Profit after tax in the comparative period reflected a depreciation and amortisation charge of €3.6m, net of tax, relating to assets forming part of the discontinued operations. Under IFRS, depreciation and amortisation are not charged on assets classified as held for sale, therefore, no equivalent depreciation and amortisation has been charged on these assets in the current period’s results. To provide comparable information on the performance of the discontinued operations, an estimated charge of €3.5m (net of tax) for depreciation and amortisation in the current period has been reflected above. See note 8 for further details.
On 1 April 2016 the Group completed the disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. These businesses are treated as discontinued operations and have performed in line with expectations for the period.
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Forward-looking information
Some statements in this announcement are forward looking. They represent expectations for the Group’s business, and involve risks and uncertainties. The Group has based these forward-looking statements on current expectations and projections about future events. The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group’s control, ac tual results or performance may differ materially from those expressed or implied by such forward-looking statements.
For further information, please contact: Investors and Analysts: Alan Ralph CFO UDG Healthcare plc Tel: +353-1-463-2300
Keith Byrne Head of Investor Relations and Strategy UDG Healthcare plc Tel: + 353-1-463-7722
Media: Business / Financial media: Lisa Kavanagh / Jack Hickey Powerscourt Tel: +44-207-250-1446
About UDG Healthcare plc:
Listed on the London Stock Exchange, UDG Healthcare plc (LON: UDG) is a leading international provider of services to the healthcare industry, employing over 7,000 employees at operations across 19 countries including the US, UK, Ireland and Germany. UDG Healthcare plc operates across three divisions: Ashfield Commercial & Medical Services, Sharp Packaging Services and Supply Chain Services. Ashfield Commercial & Medical Services is a global leader in the provision of sales, marketing and healthcare communications services to pharmaceutical clients. It focuses on supporting healthcare professionals and patients at all stages of the product life cycle enabling improved compliance and clinical outcomes. The division provides sales teams, healthcare communications, telesales, nurse educators, medical information, pharmacovigilance, regulatory and event management services to over 300 healthcare companies in 18 countries. Sharp Packaging Services is a global leader in contract packaging and clinical trial packaging services for pharmaceutical clients, operating from state of the art facilities across the US and Europe. Sharp is also a world leader in ‘Track and Trace’ serialisation services, which will require all prescription drugs to have a unique serial code for authentication and traceability. Supply Chain Services consists of Aquilant, a leading provider of outsourced sales, marketing, distribution and engineering services to the medical and scientific sectors in the UK, Ireland and the Netherlands and our interest in Medicare, a pharmacy chain in Northern Ireland. The company is listed on the London Stock Exchange and is a constituent of the FTSE 250. For more information please go to: www.udghealthcare.com
Revenue Revenue from continuing operations of €472.4 million for the six months to 31 March 2016 was 6% ahead (2% on a constant currency basis) of the same period in 2015. Ashfield Commercial & Medical Services reported revenue 3% ahead of the prior period (up 10% excluding pass through revenue) and Sharp Packaging Services reported revenue 20% ahead of the prior period. The continuing Supply Chain Services divisional revenue was 7% down on 2015 due to the closure of Aquilant’s UK laboratory distribution business in February 2015. Adjusted operating profit Adjusted operating profit from continuing operations of €48.4 million is 15% ahead (9% on a constant currency basis) of H1 2015. Adjusted operating margin The adjusted operating margin for the continuing businesses for the period of 10.2% was higher than the margin of 9.4% in H1 2015. This continues the upward trend in operating margin in recent years as the Group focuses on operating efficiencies and achieving faster growth from businesses with higher operating margins.
Adjusted profit before tax Net interest costs for the period of €7.1 million are 2% higher than H1 2015. This delivered a profit before tax from continuing operations of €41.2 million which is 18% ahead of 2015 (10% on a constant currency basis). Further details on the principal exchange rates used are provided in note 17. Taxation The effective taxation rate1 on continuing operations has increased from 22.1% in H1 2015 to 23.5% in H1 2016. This is because a larger proportion of profit has been generated in countries with higher taxation rates. Adjusted diluted earnings per share Earnings per share from continuing operations is 15% ahead (8% on a constant currency basis) of H1 2015 at 12.77 cent. On a combined continuing and discontinued basis, adjusted diluted earnings per share increased by 13% to 17.23 cent. Cash flow Net debt increased by €32.2 million in the period to €228.0 million (31 March 2015: €274.9 million). The net cash inflow from operating activities was €26.3 million with €36.6 million being generated by continuing operations and an outflow of €10.3 million from discontinued operations. €19.0 million was invested in our continuing operations in property, plant and equipment and computer software. This includes IT investment to enable our businesses to grow in an efficient manner and investment in the new facility in Sharp Packaging US. €5.3 million was paid in deferred consideration associated with prior year acquisitions while €19.9 million relating to the final 2015 dividend was paid during the period. Balance sheet Net debt at the end of the period was €228.0 million. The net debt to annualised EBITDA ratio is 1.63 times and net interest is covered 12.6 times by annualised EBITDA. Financial covenants in our principal debt facilities are based on net debt to EBITDA being less than 3.5 times and EBITDA interest cover being greater than three times. Return on capital employed The ROCE for continuing operations was 13.6%, up from 13.5% at the end of 2015. The Group targets ROCE of 15% within three years for all investments. The Group has invested significantly in acquisitions and capital expenditure in recent years and we anticipate that organic growth in future years will increase Group ROCE to the targeted 15% level. 1 Before the amortisation of acquired intangible assets, transaction costs and 2015 exceptional items.
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Dividends The directors are proposing an interim dividend of 3.05 cent per share representing an increase of 5% on the 2015 interim dividend. The interim dividend is payable to shareholders on the Company’s register at 5.00 pm on 27 May 2016 and will be paid on 20 June 2016. Investor relations UDG Healthcare’s senior management team spend a significant amount of time meeting with shareholders and the international financial community. We have invested in dedicated investor relations resources and are focused on increasing the awareness of the Company among the investor and analyst community. We communicate regularly with our shareholders throughout the year, specifically following the release of our interim and preliminary results, and at the time of major developments. Our website www.udghealthcare.com, is the primary method of communication for the majority of our shareholders. We publish our annual report, preliminary results and other public announcements on our website. In addition, details of our conference calls and presentations are available through our website. The Board of Directors considers it important to understand the views of shareholders and receive regular updates on investor perceptions. Our investor relations department provides a point of contact for shareholders and full contact details are set out in the investor relations section of our website. Shareholders can also submit an information request through the shareholder services section of our website.
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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 communicating to healthcare professionals, appropriate product use, pharmaceutical packaging and the distribution of pharmaceutical products for normal use or 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 Finance 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:
Principal risk Mitigation
Operational risks
Acquisitive growth remains a core element of the Group's strategy. A failure to execute and properly integrate acquisitions, capitalise on the synergies they bring and/or maintain and develop their talent pool, may adversely affect the Group.
All potential acquisitions are assessed and evaluated to ensure the Group's defined strategic and financial criteria are met. A discreet integration process 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.
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.
At each business review we monitor our client base and the threats and opportunities that may arise, both from our clients' activities and any concentration of our client base. The impact that any potential acquisition may have on client concentration is considered as part of the acquisition assessment process.
The Group has many legal and regulatory obligations, including in respect of: (a) protection of patient information (such as HIPAA);(b) patient and employee health and safety; and(c) promotional spend. In addition many of the Group's activities are subject to stringent licensing regulations. A failure to meet any of these could result in products and services being defective, harming patients and/or giving rise to very significant liability.
Maintenance of legal, regulatory and quality standards is a core value of the Group. We continue to build and review our quality and compliance management systems to ensure that they are fit for purpose in the context of the Group’s strategy and its legal and regulatory obligations. These reviews are supported by corporate audits on compliance, quality and environment, health and safety.
Throughout the Group medicines and medical devices can be packaged, supplied or administered directly to patients. The risk of inappropriate packaging, supply or administration could lead to a negative patient experience.
Packaging and supply activity is carried out under licence and a contract with the marketing authorisation holder (MAH). This requires a regulated quality management system to ensure the integrity of the packaged product and the supply chain. Administration of medicines to patients is covered by a detailed client contract with the MAH and the local clinical governance framework. All of these processes are subject to risk assessment, training, management review, internal and external audits.
The success of the Group is built upon effective management teams that consistently deliver superior performance. If the Group cannot attract, retain or develop suitably qualified, experienced and motivated employees, this could have an impact on business performance.
The talent requirements of the Group are monitored to ensure its management teams meet prevailing requirements in skills, competencies and performance. Remuneration policies, management development, succession planning and the systems for developing talent inherited from our acquisitions are within a programme of review and redevelopment to ensure that they remain relevant and appropriate to the Group’s ongoing strategy. Acquiring additional skill and competencies may result in external hires also to build depth in the management teams.
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Principal risks and uncertainties (continued)
Principal risk
Mitigation
The continued growth and evolution of the Group requires its organisational design and infrastructure to be subject to review and successful ongoing development. A failure to do so could adversely affect the Group's ability to meet its objectives.
At least once per year a thorough review on Strategy is carried out. One element of strategy is whether the organisational structure is fit for purpose. Each year the growth drivers for the business are reviewed against the current organisation to establish whether change is required. If there is a requirement to change, a formal review process such as the recently completed Future Fit review will ensue.
The ability of the Group to 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 strategic redesign to ensure that they are capable of meeting the Group's strategic intent and future requirements, whilst further mitigating against systems failures and the increasing threat of external interference.
Business continuity: The Group is exposed to risks that, should they arise, may give rise to the interruption of critical business processes that could adversely impact the Group or its clients.
The Group is developing and reviewing its business continuity risks as part of the risk management and the corporate audit processes. Mitigation strategies and continuity plans are part of a structured review programme.
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 inappropriate terms.
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.
Financial risks
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.
The group is exposed to liquidity, interest rate, currency and credit risks.
The management of the financial risks facing the Group 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.
UDG Healthcare plc’s reporting currency is the euro. Given the nature of the Group’s businesses, exposure arises in the normal course of business to other currencies, principally sterling and the US dollar.
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 and from translating non-euro profits into euro for reporting purposes.
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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)
P. Gray B. McAtamney
Director Director
18 May 2016
(i) The Board of UDG Healthcare plc is disclosed on the Company’s website, www.udghealthcare.com.
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Condensed consolidated income statement for the six months ended 31 March 2016
Total comprehensive income/(expense) for the period - - 27,368 (32,409) (5,041) Transactions with shareholders: New shares issued 71 3,098 - - 3,169 Share-based payment expense - - - 824 824
Dividends paid to equity holders - - (19,867) - (19,867) Release from share-based payment reserve - - 1,904 (1,904) -
At 31 March 2016 – unaudited 12,692 155,262 443,317 (23,412) 587,859
for the six months ended 31 March 2015 (restated)
Equity
Other
Attributable
share Share Retained reserves to owners Non-controlling Total capital premium earnings (Note 11) of the parent interests equity €’000 €’000 €’000 €’000 €’000 €’000 €’000 At 1 October 2014 12,485 147,176 404,212 (30,173) 533,700 (21) 533,679 Profit for the financial period - - 21,181 - 21,181 21 21,202 Other comprehensive income/(expense): Effective portion of cash flow hedges - - - 4,626 4,626 - 4,626 Deferred tax on cash flow hedges - - - (578) (578) - (578) Translation adjustment
Reclassification on loss of control of subsidiary undertakings - - - (165) (165) - (165) Loss on hedge of net investment in foreign operations - - - (21,722) (21,722) - (21,722) Remeasurement loss on defined benefit schemes
Disposal of subsidiary undertakings (net of cash and cash equivalents disposed)
-
-
-
343 - 343
Investment in joint ventures - - - (6,124) - (6,124)
Net cash outflow from investing activities
(23,805)
(8,339)
(32,144)
(23,322) (13,764) (37,086)
Cash flows from financing activities Proceeds from issue of shares (including share premium thereon)
3,169
-
3,169
4,629 - 4,629
Proceeds from interest-bearing loans and borrowings
-
-
-
11,558 - 11,558
Repayments of interest-bearing loans and borrowings
(649)
-
(649)
(12,673) - (12,673)
Group transfers 10,567 (10,567) - 14,573 (14,573) - (Decrease)/increase in finance leases (23) - (23) 2 - 2 Dividends paid to equity holders of the Company
(19,867)
-
(19,867)
(18,061) - (18,061)
Net cash (outflow)/inflow from financing activities
(6,803)
(10,567)
(17,370)
28 (14,573) (14,545)
Net increase/(decrease) in cash and cash equivalents
6,029
(29,237)
(23,208)
4,394 (28,362) (23,968)
Translation adjustment (7,921) 12,174 Cash and cash equivalents at beginning of period
214,078
157,255
Cash and cash equivalents at end of period
182,949
145,461
Cash and cash equivalents is comprised of:
Cash at bank and short term deposits 182,949 145,461
18
Notes to the condensed interim financial statements for the six months ended 31 March 2016
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 2016, are comprised of the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in joint ventures and associates. 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 2015 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
These unaudited condensed consolidated interim financial statements (“the interim accounts”) for the six months ended 31 March 2016 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 accounting policies applied in the interim accounts are the same as those applied in the 2015 Annual Report. The Group has adopted the following standards and interpretations during the period but these did not have a material effect on the results or the financial position of the Group: Annual Improvements to IFRSs 2011-2013 Cycle
Annual improvements to IFRSs 2010-2012 Cycle
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
The following standards, amendments to existing standards, and interpretations published by IASB are not yet effective for the period ended 31 March 2016 and have not been early adopted in preparing the financial statements: Amendments to IFRS 11: Accounting for acquisitions of interests in Joint Operations
Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation and amortisation
Amendments to IAS 16: Property, Plant and Equipment and IAS 41: Bearer Plants
Amendments to IAS 27: Equity method in Separate Financial Statements
Amendments to IAS 1: Disclosure Initiative
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the consolidation exception*
IFRS 14: Regulatory Deferral Accounts*
Amendments to IAS 7: Disclosure Initiative*
Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses*
IFRS 15: Revenue from contracts with customers*
IFRS 9: Financial Instruments*
IFRS 16: Leases*
Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture*
A number of the standards (*) set out above have not yet been endorsed by the EU. These standards, interpretations and amendments to existing standards will be applied for the purposes of the Group and Company financial statements with effect from their respective effective dates. The Group is currently considering the impact of these accounting standards. 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, valuation and ownership of inventory, recoverability of trade receivables and valuation of provisions. The nature of the assumptions and estimates made in the preparation of the interim accounts are the same as those identified in our most recent annual report. 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 14. The income tax expense for the six month period is calculated by applying the directors’ best estimate of the annual effective tax rate to the profit for the period. 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 condensed consolidated interim financial statements. As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.udghealthcare.com. However, if a physical copy is required, please contact the Company Secretary.
19
Notes to the condensed interim financial statements (continued)
for the six months ended 31 March 2016
3. Segmental analysis
The Group’s operations are divided into the following operating segments: Ashfield Commercial & Medical Services – The Ashfield Commercial and Medical Services segment provides sales and marketing services (‘CSO’), healthcare communications, event management and medical affairs & regulatory services to healthcare companies. Sharp Packaging Services – The Sharp Packaging Services segment provides outsourced commercial and clinical trial packaging services to healthcare companies. Supply Chain Services – The Supply Chain Services segment combines all of the Group’s healthcare logistics based companies. On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA. This has resulted in a change in the composition of the operating segments during the year ended 30 September 2015. Following this change, we have revised our segmental reporting and restated the prior year segmental disclosures as required by IFRS 8. Details of the discontinued operations are included in note 7. 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 under the Group’s operating segments is as follows:
Six months
Six months ended ended Continuing operations 31 March 31 March 2016 2015 €’000 €’000 Revenue
Profit before tax 33,137 17,605 Income tax expense (8,738) (5,471)
Profit after tax for the period 24,399 12,134
Geographical analysis of revenue United Kingdom and Republic of Ireland 188,782 190,475 North America 202,667 175,401 Continental Europe 80,965 80,333
472,414 446,209
20
Notes to the condensed interim financial statements (continued) for the six months ended 31 March 2016
4. Share of joint ventures’ profit after tax
Six months Six months ended ended 31 March 31 March 2016 2015 €’000 €’000 Group share of revenue 32,416 28,303 Group share of expenses, inclusive of tax (30,979) (27,610)
Group share of profit after tax 1,437 693
5. Exceptional items
Six months
Six months
ended ended 31 March 31 March 2016 2015 €’000 €’000 Restructuring costs and other - 4,618 Impairment of assets - 4,266 Onerous leases - 1,203 Profit on disposal of subsidiary undertakings - (268)
Exceptional items relating to continuing operations - 9,819 Exceptional items relating to discontinued operations - 844
- 10,663 Exceptional tax credit - (1,418)
Net exceptional items after taxation - 9,245
Restructuring costs and other, included in the six months to 31 March 2015, primarily included redundancy costs of €4,499,000 in relation to recently acquired and existing Group businesses. The closure of Aquilant Scientific (UK) Limited (a UK based distributor of laboratory equipment) was announced on 28 February 2015. This resulted in non-cash impairment charges in respect of goodwill (€2,216,000) and other assets (€2,050,000). Onerous lease costs were incurred in relation to the recently acquired and existing portfolio of leased properties that are no longer in use. Discontinued operations incurred redundancy costs of €844,000 during the prior period. During the prior period, the Group disposed of its shareholding in Ashfield KK as part of the Group entering into a joint venture agreement with CMIC Holdings Co., Ltd. The Group also disposed of its shareholding in Pharmaceutical Trade Services, Inc. The disposals resulted in a net profit of €268,000. Reconciliation to Group Income Statement – six months ended 31 March 2015
Cost of sales
Distribution expenses
Administration expenses
Other
operating expenses
Disposal of subsidiary
undertakings
Total
exceptional items
€’000 €’000 €’000 €’000 €’000 €’000 Restructuring costs and other - 4,162 456 - - 4,618 Impairment of assets 2,050 - - 2,216 - 4,266 Onerous leases - 59 1,144 - - 1,203 Loss on disposal of subsidiary undertakings - - -
Notes to the condensed interim financial statements (continued)
for the six months ended 31 March 2016
6. Finance income and expense
Six months Six months ended ended 31 March 31 March 2016 2015 €’000 €’000 Finance income Income arising from cash deposits 264 197 Fair value of cash flow hedges transferred from equity - 32,891 Fair value adjustments to fair value hedges - 7,702 Fair value adjustment to guaranteed senior unsecured notes 1,654 - Foreign currency gain on retranslation of guaranteed senior unsecured loan notes 3,424 - Ineffective portion of cash flow hedges 93 63 Net finance income on pension scheme obligations 58 -
5,493 40,853
Finance expense Interest on bank loans and other loans -wholly repayable within 5 years (4,853) (3,165) -wholly repayable after 5 years (2,289) (3,491) Interest on finance leases (1) (2) Interest on overdrafts (13) (106) Unwinding of discount on provisions (369) (409) Fair value adjustments to fair value hedges (1,654) - Fair value of cash flow hedges transferred from equity (3,424) - Fair value adjustments to guaranteed senior unsecured loan notes - (7,702) Foreign currency loss on retranslation of guaranteed senior unsecured loan notes - (32,891) Net finance cost on pension scheme obligations - (26)
(12,603) (47,792)
Net finance expense relating to continuing operations (7,110) (6,939) Net finance expense relating to discontinued operations (51) (55)
Net finance expense (7,161) (6,994)
7. Net result from discontinued operations and assets and liabilities classified as held for sale
On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug Sangers, TCP Group and MASTA for an aggregate cash consideration of €407.5 million before adjustments in respect of working capital, taxation and costs. The disposal was approved by shareholders at an EGM on 13 October 2015 and on 1 April 2016 the Group completed the disposal of these businesses. The Group has treated these operations as discontinued operations and assets held for sale in accordance with IFRS 5. The comparative Group Income Statement, Group Statement of Comprehensive Income and Group Cash Flow to 31 March 2015 have been restated to show the discontinued operations separately from continuing operations. The following table details the results of discontinued operations included in the Group Income Statement:
31 March 2016
31 March 2015
€'000 €'000
Revenue 682,875 685,231
Cost of sales (632,961) (636,448)
Gross profit 49,914 48,783
Selling and distribution expenses (33,921) (33,788)
Administration expenses (2,266) (2,770)
Other operating expenses - (900)
Settlement gain on defined benefit pension 2,404 -
Transaction costs (7,534) -
Operating profit 8,597 11,325 Net finance expense (51) (55)
Profit before exceptional items and tax 8,546 11,270
Exceptional items - (844)
Profit from discontinued operations before tax 8,546 10,426
Income tax expense (1,579) (1,358)
Profit from discontinued operations after tax 6,967 9,068
22
Notes to the condensed interim financial statements (continued) for the six months ended 31 March 2016
7. Net result from discontinued operations and assets and liabilities classified as held for sale (continued)
In accordance with IFRS 5, depreciation of property, plant and equipment and amortisation of intangibles has not been charged on the assets held for sale. If the assets had continued to be depreciated and amortised, the respective pre-tax charges for the current period would have been €3,526,000 and €720,000. The profit for the year from discontinued operations is fully attributable to the equity holders of the company. The following table details the assets and liabilities classified as held for sale in the Group Balance Sheet:
Carrying value
31 March 2016
Carrying value
30 September 2015
€'000 €'000 Assets
Property, plant and equipment 85,023 84,867
Goodwill 14,296 15,629
Intangible assets 46,894 40,426
Deferred income tax assets 429 527
Inventories 112,377 117,155
Trade and other receivables 215,665 215,021
Current income tax asset - 195
Assets held for sale 474,684
473,820
Liabilities
Deferred income tax liabilities (381) (387)
Trade and other payables (256,869) (276,682)
Employee benefits (2,527) (3,264)
Current income tax liabilities (334) -
Liabilities held for sale (260,111)
(280,333)
Net assets 214,573
193,487
23
Notes to the condensed interim financial statements (continued) for the six months ended 31 March 2016
8. Earnings per ordinary share
Continuing operations
Discontinued operations
Total
Continuing operations
Discontinued operations
Total
2016 2016 2016 2015 2015 2015 €’000 €’000 €’000 €’000 €’000 €’000 Profit attributable to the owners of the parent 24,399 6,967 31,366 12,113 9,068 21,181 Adjustment for amortisation of acquired intangible assets (net of tax) 6,347
-
6,347
6,366
206
6,572 Adjustment for transaction costs (net of tax) 834
7,534
8,368
276
-
276
Adjustment for exceptional items (net of tax) -
-
-
8,515
730
9,245
Adjustment for amortisation and depreciation on assets classified as held for sale (net of tax) -
(3,456)
(3,456)
-
-
-
Adjusted profit attributable to owners of the parent 31,5801
11,0452
42,625
27,270
10,004
37,274
2016 2015
Number of shares
Number of shares
Weighted average number of shares 246,079,718 243,529,382 Number of dilutive shares under option 1,299,770 1,286,719
Weighted average number of shares, including share options 247,379,488 244,816,101
Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total 2016 2016 2016 2015 2015 2015 Basic earnings per share – cent 9.92 2.83 12.75 4.98 3.72 8.70 Diluted earnings per share – cent 9.86 2.82 12.68 4.95 3.70 8.65 Adjusted basic earnings per share – cent 12.831 4.492 17.32 11.20 4.11 15.31 Adjusted diluted earnings per share – cent
12.771
4.462
17.23
11.14
4.09
15.23
Non-GAAP information The Group reports certain financial measures 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 measures 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 measures 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.
1 Adjusted profit attributable to owners of the parent from continuing operations is stated before the amortisation of acquired intangible assets and transaction costs. 2 Adjusted profit attributable to owners of the parent from discontinued operations is stated after charging depreciation and amortisation of assets classified as held for sale (€3.5m, net of tax) and adding back transaction costs (€7.5m, net of tax). Adjusted profit attributable to owners of the parent in the comparative period reflected a depreciation and amortisation charge of €3.6m, net of tax, relating to assets forming part of the discontinued operations. Under IFRS, depreciation and amortisation are not charged on assets classified as held for sale, therefore, no equivalent depreciation and amortisation has been charged on these assets in the current period’s results. To provide comparable information on the performance of the discontinued operations, an estimated charge of €3.5m (net of tax) for depreciation and amortisation in the current period has been reflected in the adjustments above. Treasury shares have been excluded from the weighted average number of shares in issue used in the calculation of earnings per share. The average market value of the Company’s shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the year.
24
Notes to the condensed interim financial statements (continued) for the six months ended 31 March 2016
9. Property, plant and equipment
Land and buildings
Plant and equipment
Motor vehicles
Computer equipment
Assets under construction Total
€’000 €’000 €’000 €’000 €’000 €’000 Cost At 1 October 2015 72,817 86,990 995 20,456 10,017 191,275 Additions in period 461 7,955 126 2,704 5,781 17,027 Disposals in period (16) (2,961) (64) (298) - (3,339) Transfer to assets held for sale - (1,163) - - - (1,163) Reclassifications - 8 (79) 71 - - Translation adjustment (2,145) (1,949) (94) (1,141) (363) (5,692) At 31 March 2016 71,117 88,880 884 21,792 15,435 198,108
Depreciation
At 1 October 2015 20,929 41,294 666 10,483 - 73,372 Depreciation charge for the period 2,094 4,632 27 2,032 - 8,785 Eliminated on disposal (12) (2,738) (63) (257) - (3,070) Transfer to assets held for sale - (238) - - - (238) Reclassifications - 8 (73) 65 - - Translation adjustment (658) (1,057) (73) (655) - (2,443) At 31 March 2016 22,353 41,901 484 11,668 - 76,406
Carrying amount
At 31 March 2016 48,764 46,979 400 10,124
15,435 121,702
At 30 September 2015 51,888 45,696 329 9,973
10,017 117,903
10. Movement in goodwill, intangible assets and investment in joint ventures and associates
Investment
in joint ventures
Goodwill
Intangible assets
and associates
€’000 €’000 €’000 Balance at 1 October 2015 358,213 101,693 23,079 Investment in computer software - 1,984 - Amortisation of acquired intangible assets - (7,309) - Amortisation of computer software - (1,285) - Share of joint ventures’ profit after tax - - 1,437 Transfer to assets held for sale - (1,679) - Translation adjustment (12,251) (3,108) (782)
Balance at 31 March 2016 345,962 90,296 23,734
25
Notes to the condensed interim financial statements (continued)
for the six months ended 31 March 2016
11. Other reserves
Cash flow
Share-based
Foreign
Treasury
Capital redemption
hedge payment exchange shares reserve Total
€’000 €’000 €’000 €’000 €’000 €’000
Balance at 1 October 2015 (4,357) 4,762 15,182 (5,760) 250 10,077
Reclassification on loss of control of subsidiary undertakings - - (165) -
- (165)
Balance at 31 March 2015 (7,843) 4,795 29,890 (5,758) 250 21,334
12. Net debt
As at As at As at 31 March 31 March 30 Sept 2016 2015 2015 €’000 €’000 €’000 Current assets Cash at bank and short term deposits 182,949 145,461 214,078 Derivative financial instruments 4,520 4,799 4,750 Non-current assets Derivative financial instruments 13,386 29,601 22,048 Current liabilities
Notes to the condensed interim financial statements (continued)
for the six months ended 31 March 2016
13. Provisions
Deferred
contingent consideration
Onerous leases
Restructuring and other
costs
Total
€’000 €’000 €’000 €’000
Balance at 1 October 2015 22,029 372 3,790 26,191
Charge/(release) to income statement 324 - (369) (45)
Utilised during the period (5,281) (26) (2,050) (7,357)
Unwinding of discount 369 - - 369
Translation adjustment (587) - 2 (585)
Balance at 31 March 2016 16,854 346 1,373 18,573
Non-current 7,167 Current 11,406
Total 16,854 346 1,373 18,573
14. Employee benefits
Employee Employee Employee
benefit benefit benefit
asset liability total
€’000 €’000 €’000
Employee benefit asset/(liability) at 1 October 2015 13,067 (21,567) (8,500) Current service cost (994) (233) (1,227) Curtailment gain - 328 328 Settlement gain - 3,663 3,663 Interest costs 238 (238) - Contributions paid - 6,187 6,187 Remeasurement gain/(loss) 343 (4,774) (4,431) Translation adjustment (195) 186 (9)
Employee benefit asset/(liability) at 31 March 2016 12,459 (16,448) (3,989)
Analysed as:
Assets and liabilities associated with continuing operations 12,459 (13,921) (1,462) Liabilities held for sale1 - (2,527) (2,527)
12,459 (16,448) (3,989) 1This scheme relates to United Drug Sangers which is included in liabilities associated with assets classified as held for sale at 30
September 2015 and 31 March 2016.
Employee Employee Employee benefit benefit benefit asset liability total €’000 €’000 €’000 Employee benefit asset/(liability) at 1 October 2014 13,553 (19,780) (6,227) Current service cost (855) (326) (1,181) Interest on scheme obligations 213 (299) (86) Contributions paid - 1,170 1,170 Remeasurement gain/(loss) 633 (15,407) (14,774) Translation adjustment 2,338 (254) 2,084
Employee benefit asset/(liability) at 31 March 2015 15,882 (34,896) (19,014)
27
Notes to the condensed interim financial statements (continued) for the six months ended 31 March 2016
14. Employee benefits (continued)
As set out in the consolidated financial statements for the year ended 30 September 2015, the Group operates a number of
defined benefit pension schemes which are funded by the payments of contributions to separately administered trust funds.
The employee benefit asset relates to the United States pension scheme and the employee benefit liability relates to the
Republic of Ireland (ROI) and Northern Ireland (NI) pension schemes. The remeasurement loss during the current period
primarily relates to a decrease in the discount rates in respect of the Republic of Ireland schemes. The change in the
discount rate within the schemes is reflective of changes in bond yields during the period. The United States scheme has an
actuarial gain in the current period arising from a higher than expected return on plan assets. Accrual of pension benefits
within the ROI schemes ceased with effect from 31 December 2015.
On 18 September 2015 the Group announced the proposed disposal of United Drug Supply Chain Services, United Drug
Sangers, TCP Group and MASTA for an aggregate cash consideration of €407.5 million. The disposal was approved by
shareholders at an EGM on 13 October 2015 and on 1 April 2016 the Group completed the disposal of these businesses.
Following completion of the disposal, the future funding obligations in respect of the NI scheme have ceased to be the
responsibility of the Group. Responsibility for the funding requirements in respect of the ROI schemes remain within the
Group.
During the current period, a general offer was made to the current members of the ROI schemes to transfer their accrued
benefits from the schemes in exchange for a fixed monetary amount. Acceptance of the offer was at the discretion of
individual members and resulted in a settlement gain of €3,663,000. Related professional fees amounted to €238,000,
resulting in a net income statement gain of €3,425,000. €2,404,000 of this gain related to discontinued operations.
The principal assumptions and associated changes are as follows:
Republic of Ireland Schemes
United States Scheme
Northern Ireland Scheme1
As at As at As at As at As at As at
31 March 30 Sept 31 March 30 Sept 31 March 30 Sept
2016 2015 2016 2015 2016 2015
Rate of increase in salaries 1.75% 2.75% 2.75%-4.00% 2.75-4.00% 0.00% 0.00%
Rate of increase in pensions 0-1.75% 0-1.75% 0.00% 0.00% 1.80-3.20% 1.80-3.30%
Discount rate 2.00% 2.70% 3.60% 4.00% 3.80% 4.00% 1This scheme relates to United Drug Sangers which is included in liabilities associated with assets classified as held for sale at 30
September 2015 and 31 March 2016.
15. Financial instruments
The fair values of financial assets and financial liabilities, together with the carrying amounts in the condensed consolidated