Join our community of smart investors

UDG Healthcare refocuses

RESULTS: UDG's results were steady rather than spectacular as the Irish medicines supplier reshapes its business

Results for United Drug (UDG), now know as UDG Healthcare, were complicated by a mixture of exceptional charges totalling almost €30m (£25m), as the medicine wholesaler and pharma services business went through the process of restructuring its UK operations. Strip these out and underlying operating profits rose by 13 per cent to €95.1m, most of which was generated by acquisitions.

IC TIP: Hold at 310p

UDG's core medicines supply business is centred on the Irish Republic, where austerity measures have been a feature for several years. However, one positive benefit is that UDG's market share has grown; higher sales of €1.46bn, a 1 per cent increase on 2012, showed the impact of this trend. Unfortunately, the lower value of the market meant divisional operating profits still edged down to €46.2m, but UDG looks well-placed for a recovery in Ireland.

The sales and pharma marketing division benefited most from acquisitions, with revenues increasing by 74 per cent to €372m, and operating profits up 55 per cent to €31.8m. Management reckons the trend towards outsourcing sales and marketing functions at big pharma companies will boost this segment in particular; pharma outsourcing already generates a third of UDG's operating profits.

Broker Investec forecasts pre-tax profits for 2014 of €86m, giving EPS of 28.1¢, compared with €81.8m and 27¢ previously.

UDG HEALTHCARE (UDG)

ORD PRICE:310pMARKET VALUE:£748m
TOUCH:309-310p12-MONTH HIGH:362pLOW: 231p
DIVIDEND YIELD:2.6%PE RATIO:32
NET ASSET VALUE:174¢*NET DEBT:57%

Year to 30 SepTurnover (€bnPre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20091.7239.114.28.00
20101.7254.418.78.40
20111.7444.115.18.66
20121.8359.020.09.04
20132.0334.911.89.56
% change+11-41-41+6

Ex-div: 27 Nov

Payment: 24 Feb

*Includes intangible assets of €391m, or 162¢ a share

£1=€1.20