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United Drug sees off austerity

RESULTS: United Drug's Irish operation may be struggling, but the group is benefiting from a successful diversification strategy
November 14, 2012

These solid full-year figures from Ireland-based drugs wholesaler, United Drug (UDG), demonstrate the value of diversification after the group - which is tackling austerity measures in Ireland - shifted into services and packaging for US pharmaceutical companies. That helped adjusted operating profit rise 10 per cent year-on-year to €84.4m (£67.5m), with US operations contributing almost a third of this.

IC TIP: Buy at 223p

Moreover, the group managed to grow its core business, despite big pressures in the Irish and European medicines market as budgets are cut. Revenue here grew 3 per cent to €1.46bn, with operating profit having risen 9 per cent to €48m, boosted by cost savings. That created a solid platform for the fast-growth packaging business where revenue jumped 16 per cent to €161m and profits soared 26 per cent to €15m - as more companies outsourced their packaging operations. Meanwhile, the healthcare services division, which provides legal, call centre and regulatory advice to pharmaceutical companies, grew sales by a more modest 7 per cent to €214m. This operation, however, should benefit during 2013 from the €35m acquisition of pharmaceuticals logistics company, Pharmexx, announced in July.

Broker Peel Hunt left its forecasts unchanged for now and expects adjusted pre-tax profit for 2013 of €75.6m, giving EPS of 25.6¢ (from 24.9¢ in 2012).

UNITED DRUG (UDG)

ORD PRICE:223pMARKET VALUE:£534m
TOUCH:221-224p12-MONTH HIGH:245pLOW: 155p
DIVIDEND YIELD:3.2%PE RATIO:14
NET ASSET VALUE:179¢NET DEBT:51%

Year to 30 SepTurnover (€m)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20081.6858.621.88.00
20091.7239.114.28.00
20101.7254.418.78.40
20111.7444.115.18.66
20121.8358.919.99.04
% change+5+34+32+4

Ex-div: 21 Nov

Payment: 25 Feb

*Includes intangible assets of €385m, or 161¢ a share £1=€1.25